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Stock A has a 10% expected return, a beta coefficient of 0.9, and a 35% standard deviation of expected returns. Stock B has a 12.5%
Stock A has a 10% expected return, a beta coefficient of 0.9, and a 35% standard deviation of expected returns. Stock B has a 12.5% expected return, a beta coefficient of 1.2, and a 25% standard deviation. The risk free rate is 6%, and the market return is 11%.
a. What stock do you recommend your client to buy? You must support your recommendation.
b. What stock adds the greatest amount of risk to a portfolio? You must support your answer.
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