Question
A portfolio manager is providing recommendations to her clients. Her research department has prepared the following information for her: Portfolio Forecasted Return std dev Stock
A portfolio manager is providing recommendations to her clients. Her research department has prepared the following information for her:
Portfolio Forecasted Return std dev
| Stock X | 12.0% | 7.5% |
| Stock Y | 18.0% | 10% |
| Risk-free | 4.0% | 0% |
Which stock should an investor hold? Explain your answers.
Draw the Capital Allocation Line of Stock X and Stock Y in the following xy-coordinate system.
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The Finance Book
Authors: Stuart Warner, Si Hussain
2nd Edition
1292401982, 978-1292401980
