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An investor has $12,000 invested in General Motors (GM) and is considering building a two-stock portfolio by investing another $9,000 in the Home Depot (HD)
An investor has $12,000 invested in General Motors (GM) and is considering building a two-stock portfolio by investing another $9,000 in the Home Depot (HD) stock or Domino's (DPZ) stock. The investor would like the portfolio to have an expected return of 8% or higher and a standard deviation of 18% or lower. Use the information in the table below to answer the following questions: a. (0.5 point) What are the weights of GM and the new stock (i.e., HD or DPZ) in the portfolio, respectively? b. (1 point) What is the expected return and standard deviation of the portfolio if the investor choose to invest in HD and DPZ, respectively? c. (0.5 point) Which stock should the investor choose in order to achieve the desired level of expected return and standard deviation of the portfolio? Briefly explain. Round your answers to two decimal places. Please show your work (e.g., formulas, Excel functions, and inputs used in the formulas or functions)
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