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George is an investor who believes that past variability of stocks is a reasonably good estimate of future risk associated with the stocks. George works
George is an investor who believes that past variability of stocks is a reasonably good estimate of future risk associated with the stocks. George works on creating a new portfolio and has already purchased stock. A. Now he considers two other stocks, B and C. George collected data on the historic rates of return for all three stocks, which are presented in the following table. Suppose George can only afford to complement stock A by adding just one of the two other stocks, either stock B or stock C. The following table shows the correlation coefficients between stocks A and B and between stocks A and Cr as well as the average returns and standard deviation for the two potential portfolios, AB and AC : Suppose George has to choose between two portfolios, AB and AC. George will be better off choosing TOTAL SCORE: 2/4 (to complate this step and uniock the neat stap)
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