An investor consider to invest in three financial assets, including stock A and stock B with the information belows. Given that risk-free rate is 2.5%

data in table

a/ Calculate expected return and standard deviation of the two stocks.

b/ Which stock should be invested if the investor is considering stock A and stock B. Explain?

c/ Should we combine the stock A and stock B to diversify the risk of the ptfolio. why?

d/ What are the investment proportion of (A) and (B) in the minimum variance risky portfolio

e/ Calculate the sharpe ratio of the minimum variance risky portfolio

f/ What are the investment proportion of (A) and (B) in the optimal risky portfolio

g/ What is the expected return and standard deviation of the optimal risky portfolio?

Year Price of stock A Dividend Price of Dividend of stock A stock B of stock B 1 20.25 4 2 19.21 24.14 2 25.63 29.31 1 1 3 5 27.32 4 2 25.59 27.32 28.53 5 31.67 1