The manager of a large and diversified portfolio is considering an incremental change to the portfolio. However, after narrowing her choices down to Table 1, she is perplexed. She claims that a law of finance - risks and return are matched is certainlybroken!

Table 1: incremental investment choices

Annual Return (%)Standard Deviation (%)100-stock index95.4BigPipe Tobacco7.66.5

In 1-2 paragraphs, comment on the managers statement, is she incorrect? Clearly state any assumptions or theories relied upon