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Investors can allocate their wealth between (i) the risk-free asset, and (ii) one of the three risky assets as shown below. For example, 20% in
Investors can allocate their wealth between (i) the risk-free asset, and (ii) one of the three risky assets as shown below. For example, 20% in risk-free and 80% in A, or 30% in risk-free and 70% in B, or 40% in risk-free and 60% in C, and so on.
Risky Asset | E(r) | Stdev |
A | 20% | 25% |
B | 30% | 35% |
C | 40% | 45% |
The risk-free rate is 5%. If investors target an expected annual return of 30%, what is the lowest stdev that can be achieved among all the possible allocations?
Show your answer in % and round to two decimals (e.g. xx.xx%).
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