Assume the stock market consists only of two stocks, A and B$,$ with the following properties based on yearly data: The expected return of stock A is $20\%,$ the expected return of stock B is $15\%.$ The volatility of stock A is $30\%,$ the volatility of stock B is $40\%.$ The covariance between the returns of stocks A and B is $0\mathrm{.}03.$ Assuming a target of $10\%,$ what is the weight of stock A$,$ when selecting the portfolio according to Roy's criterion?

Question $5$Answer

a$.$

Somewhere between $68\%$ and $76\%$

b$.$

Somewhere between $38\%$ and $45\%$

c$.$

Somewhere between $48\%$ and $55\%$

d$.$

Somewhere between $88\%$ and $95\%$

e$.$

Somewhere between $78\%$ and $85\%$