Reading 50: An Introduction to Portfolio Management - LOS black, Stock, style, white, standard

mayanfang1

Q16. Stock A has a standard deviation of 0.5 and Stock B has a standard deviation of 0.3. Stock A and Stock B are perfectly positively correlated. According to Markowitz portfolio theory how much should be invested in each stock to minimize the portfolio's standard deviation?

A)   30% in Stock A and 70% in Stock B.

B)   50% in Stock A and 50% in Stock B.

C)   100% in Stock B.

mayanfang1

答案和详解如下：

Q16. Stock A has a standard deviation of 0.5 and Stock B has a standard deviation of 0.3. Stock A and Stock B are perfectly positively correlated. According to Markowitz portfolio theory how much should be invested in each stock to minimize the portfolio's standard deviation?

A)   30% in Stock A and 70% in Stock B.

B)   50% in Stock A and 50% in Stock B.

C)   100% in Stock B.

Correct answer is C)         

Since the stocks are perfectly correlated, there is no benefit from diversification. So, invest in the stock with the lowest risk.

duo1115

c

fange520

c

jacky_z

Thanks

erpang8888

a

connie198226

thanks

wildwolf06

C

dullmul

thx

wangyoucao

THANKS