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4. In Simpleland, the risky asset market consists of only two risky stocks, A and...

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Accounting

4. In Simpleland, the risky asset market consists of only two risky stocks, A and B, whose details are listed below:

imageFurthermore, the correlation coefficient between the returns of stocks A and B is = 0.1.

(a) What is the expected rate of return on the market portfolio?

(b) What would be the standard deviation of the market portfolio?

# of Shares Price Expected Standard Stock Outstanding per Share Rate of Return Deviation A 100 $1.50 15% 15% B 150 $2.00 12% 9%

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