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Keane Koh, an avid investor, is considering two (2) potential stocks to add to his own stock portfolio which he had constructed. Keane intends to
Keane Koh, an avid investor, is considering two (2) potential stocks to add to his own stock portfolio which he had constructed. Keane intends to invest in ONE (1) of the two (2) stocks only. Based on his research through the reading of analyst reports, he gathers the following information: Forecasted return Standard Deviation Beta Stock G 15% 28% 0.7 Stock T 17% 22% 1.6 Market index 12% 18% 1.0 Risk-free rate 2% (a) If Keane's current portfolio is well-diversified, recommend and appraise which ONE (1) of the two (2) stocks above would be a better addition to the portfolio. (10 marks)(b) If Keane instead decides to liquidate his entire portfolio and invest all proceeds in ONE (1) of the above investment opportunities, recommend and appraise which option would be the best choice. (15 marks)
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