Math Solutions

[Solution] Investor’s daily, a magazine rating stocks and mutual funds, has predicted that stock A will have annual return 10% with a standard deviation

Question: Investor’s daily, a magazine rating stocks and mutual funds, has predicted that stock A will have annual return 10% with a standard deviation of 4%, and stock B will have annual return 20% with a standard deviation of 10%. They have also calculated that the correlation between the return of these stocks is -0.2.

How much should one invest in each stock so that the expected annual return is 13%?

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