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 | 10.0% | 5% |
| Stock Y | 15.0% | 12% |
| Risk-free | 5.0% | 0% |
1. Which stock should an investor hold? Explain your answers.
2. Draw the Capital Allocation Line of Stock X and Stock Y in one xy-coordinate system.
E(ri)
s(ri)
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Essentials Of Corporate Financial Management
Authors: Glen Arnold
1st Edition
1405847042, 978-1405847049
