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An investor wants to form a portfolio based on two risky assets (e.g., two stocks). Expected return and standard deviation for stock A is 5%
An investor wants to form a portfolio based on two risky assets (e.g., two stocks). Expected return and standard deviation for stock A is 5% and 40% respectively. Expected return and standard deviation for stock B is 25% and 55% respectively. The correlation coefficient of A and B is 0.8. Sketch a graph indicating the possible portfolio expected return versus portfolio standard deviation. Please clearly label (1) both axes, (2) both stock A and stock B, and (3) minimum variance portfolio (MVP)?
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