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Stock A has an expected return of 10% and a standard deviation of 10%. Stock B has an expected ...

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Stock A has an expected return of 10% and a standard deviation of 10%. Stock B has an expected ...

Stock A has an expected return of 10% and a standard deviation of 10%. Stock B has an expected return of 15% and a standard deviation of 20%. The two stocks are perfectly negatively correlated ( = -1). What set of weights yields a portfolio with a zero variance?
A) 2/3 in Stock A; 1/3 in Stock B
B) 2/3 in Stock B; 1/3 in Stock A
C) 2 in Stock A; -1 in Stock B
D) 2 in Stock B; -1 in Stock A
E) None of the above.

Textbook

Corporate Finance Online

Edition: 1^st

Authors: Eakins, McNally

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