Question
Sonny owns $5,000 worth of High Risk Enterprises (HRE) stock.HRE has a standard deviation of 16 percent and a beta of 2.0. Hewants to invest
Sonny owns $5,000 worth of High Risk Enterprises (HRE) stock.HRE has a standard deviation of 16 percent and a beta of 2.0. Hewants to invest another $5,000 and create a $10,000 portfolio thatis equally as risky as the overall market. Which one of thefollowing will accomplish his goal? A. invest the additional $5,000 in a security that is equallyas risky as the market B. sell HRE and invest the entire $10,000 in risk-freesecurities C. sell HRE and invest $5,000 in risk-free securities and$5,000 in a stock that has a standard deviation of 4 percent D. invest the additional $5,000 in a stock that has a standarddeviation of 4 percent E. invest the additional $5,000 in risk-free securities
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