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Assume Stocks A and B have the following characteristics: Stock Expected Return Standard Deviation A 9.6% 33.6% B 15.6% 62.6% The covariance between the returns

Assume Stocks A and B have the following characteristics:

Stock Expected Return Standard Deviation
A 9.6% 33.6%
B 15.6% 62.6%

The covariance between the returns on the two stocks is .0016.

a.

Suppose an investor holds a portfolio consisting of only Stock A and Stock B. Find the portfolio weights, XA and XB, such that the variance of her portfolio is minimized. (Hint: Remember that the sum of the two weights must equal 1.) (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., 32.1616.)

Portfolio weights
Stock A
Stock B

b.

What is the expected return on the minimum variance portfolio? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Expected return %

c.

If the covariance between the returns on the two stocks is .05, what are the minimum variance weights? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., 32.1616.)

Minimum variance weights
Stock A
Stock B

d.

What is the variance of the portfolio in part (c)? (Do not round intermediate calculations and round your answer to 4 decimal places, e.g., 32.1616.)

Variance of the portfolio

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