1. An investor can design a risky portfolio based on two
stocks, A and B.
Stock A has an expected return of 18% and a standard
deviation of return of 20%.
Stock B has an expected return of 13% and a standard
deviation of return of 3%.
The correlation coefficient between the returns of A and
B is 0.30.
The risk-free rate of return is
7%.
The proportion of the optimal risky portfolio that
should be invested in stock A is _________.
2. . A stock has a correlation
with the market of 0.50. The standard deviation of the market is
25%, and the standard deviation of the stock is 35%. What is
the stock's beta?