Sarah’s response to investing your retirement account entirely in West Coast Yachts has convinced you that this may not be the best alternative. You now consider that a 100 per cent investment in the bond fund may be the best alternative. Is it?

You are discussing your retirement plan with Dan Ervin when he mentions that Sarah Brown, a representative from Skandla Financial Services, is visiting West Coast Yachts today. You decide that you should meet with Sarah, so Dan sets up an appointment for you later in the day.
When you sit down with Sarah, she discusses the various investment options available in the company’s retirement account. You mention to Sarah that you researched West Coast Yachts before you accepted your new job. You are confident in management’s ability to lead the company. Analysis of the company has led to your belief that it is growing and will achieve a greater market share in the future. Given these considerations, you are leaning towards investing 100 per cent of your retirement account in West Coast Yachts.
Assume the risk-free rate is the return on a 30-day T-bill. The correlation between the Skandla bond fund and large-cap equity fund is 0.27.