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The stock of Jones Trucking is expected to return 15 percent annually with a standard deviation of 8 percent. The stock of Bush Steel Mills
The stock of Jones Trucking is expected to return 15 percent annually with a standard deviation of 8 percent. The stock of Bush Steel Mills is expected to return 15 percent annually with a standard deviation of 14 percent. The correlation between the returns from the two securities has been estimated to be +0.3. The beta of the Jones stock is 1.2, and the beta of the Bush stock is 1.5. The risk-free rate of return is expected to be 8 percent, and the expected return on the market portfolio is 13 percent. The current dividend for Jones is $3. The current dividend for Bush is $5. a. What is the expected return from a portfolio containing the two securities if 60 percent of your wealth is invested in Jones and 40 percent is invested in Bush? Round your answer to one decimal place b. What is the expected standard deviation of the portfolio of the two stocks? Round your answer toto decimal places. C. Which stock is the better buy in the current market? Round your answers to one decimal place. Required return (Jones): Required return (Bush) The -Select-B stock is the better buy because the expected return is -Select-B than the required return
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