Question
There are two stocks, A and B, and a risk-free rate of 5%. Stock A has an expected return of 12% and a standard deviation
There are two stocks, A and B, and a risk-free rate of 5%. Stock A has an expected return of 12% and a standard deviation of 20%. Stock B has an expected return of 8% and a standard deviation of 16%. The MVE (tangency) portfolio consists of 75% A and 25% B. Its standard deviation is 12%.
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What is the expected return of the MVE portfolio?
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What is the correlation between stocks A and B?
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An investor's optimal portfolio has a standard deviation of 20%. What is the weight of stock A in her optimal portfolio?
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The Option Trader Handbook
Authors: George Jabbour
2nd Edition
0470481617, 978-0470481615
