Business, 29.07.2020 05:01 faithcalhoun

Assume an economy in which there are three securities: Stock A with rA = 10% and σ A = 10%; Stock B with rB = 15% and σ B = 20%; and a riskless asset with r RF = 7%. Stocks A and B are uncorrelated (rAB = 0). Which of the following statements is most correct? A. The expected return on the investor's portfolio will probably have an expected return that is somewhat below 10%.
B. The expected return on the investor's portfolio will probably have an expected return that is somewhat above 15% and a standard deviation (SD) of approximately 20%.
C. Since the two stocks have a zero correlation coefficient, the investor can form a riskless portfolio whose expected return is in the range of 10% to 15%.
D. The investor's risk/return indifference curve will be tangent to the CML at a point where the expected return is in the range of 7% to 10%.
E. The expected return on the investor's portfolio will probably have an expected return that is somewhat below 15% and a standard deviation (SD) that is between 10% and 20%.

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Assume an economy in which there are three securities: Stock A with rA = 10% and σ A = 10%; Stock B...

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