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A portfolio manager has the following risk-return information of three securities: Portfolio Forecasted Return Standard Deviation Stock X 20% 30% Stock Y 15% 25% Risk-free

A portfolio manager has the following risk-return information of three securities:

Portfolio

Forecasted Return

Standard Deviation

Stock X

20%

30%

Stock Y

15%

25%

Risk-free

5%

0%

If the manager is only able to invest in one and only one stock between X and Y, which stock should she/he choose? Explain your answers.

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