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Question 4 (6 points) Penelope currently holds 1,000 shares of HiRisq Corp. This stock has an expected return of 0.07% and a variance of 0.08.
Question 4 (6 points) Penelope currently holds 1,000 shares of HiRisq Corp. This stock has an expected return of 0.07% and a variance of 0.08. HiRisq shares trade at $20 per share. She plans to sell 700 of her HiRisq shares and buy 140 shares of LoRisq Inc. at $100 per share. LoRisq shares have an expected return of 0.06% and a standard deviation of 0.16%. The returns of HiRisq and LoRisq have a correlation of 0.5. If Penelope follows through on her plan, the standard deviation of her new portfolio i... State your answer as a decimal (not a percentage) with two significant digits. Your Answer: Answer Question 5 (2 points) Which of the following statement(s) is (are) true regarding the selection of a portfolio from those that lie on the Capital Allocation Line? c. Investors choose the portfolio that matches their risk preferences b and c b. More risk-averse investors will invest less in the optimal risky portfolio and more in the risk-free security than less risk-averse investors. a. Less risk-averse investors will invest more in the risk-free security and less in the optimal risky portfolio than more risk-averse investors. a and c
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