The proportion of the optimal risky portfolio that should be invested in stock A is 0%.
Using this formula
Stock A optimal risky portfolio=[(Wa-RFR )×SDB²]-[(Wb-RFR)×SDA×SDB×CC] ÷ [(Wa-RFR )×SDB²+(Wb-RFR)SDA²]- [(Wa-RFR +Wb-RFR )×SDA×SDB×CC]
Where:
Stock A Expected Return (Wa) =16%
Stock A Standard Deviation (SDA)= 18.0%
Stock B Expected Return (Wb)= 12%
Stock B Standard Deviation(SDB) = 3%
Correlation Coefficient for Stock A and B (CC) = 0.50
Risk Free rate of return(RFR) = 10%
Let plug in the formula
Stock A optimal risky portfolio=[(.16-.10)×.03²]-[(.12-.10)×.18×.03×0.50]÷ [(.16-.10 )×.03²+(.12-.10)×.18²]- [(.16-.10 +.12-.10 )×.18×.03×0.50]
Stock A optimal risky portfolio=(0.000054-0.000054)÷(0.000702-0.000216)
Stock A optimal risky portfolio=0÷0.000486×100%
Stock A optimal risky portfolio=0%
Inconclusion the proportion of the optimal risky portfolio that should be invested in stock A is 0%.
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Answer:
A) Communicate regularly about the firm’s progress toward meeting its strategic objectives as well as the threats and weaknesses that pose challenges.
D) Adopt a compensation plan that pays employees more when the company meets its goals.
Explanation:
If Cumberland Farms wanted to take other actions to empower its workforce, they should consider communicate regularly about the firm’s progress toward meeting its strategic objectives as well as the threats and weaknesses that pose challenges. this will allow employees to have a better idea of the company and can make better decisions.
They must also adopt a compensation plan that pays employees more when the company meets its goals which would motivate employees to make decisions that would benefit the company and work harder.
