The table below presents the returns on stocks ABC and XYZ for a five-year period.

Year	ABC	XYZ
1	0.35	0.13
2	0.28	0.35
3	-0.07	-0.12
4	-0.22	-0.20
5	0.48	0.52

Assume that the average returns from the data equals the expected returns for the respective stocks. If you want to form a portfolio with expected returns of 15%, what proportion of your assets would you invest in each of these stocks?

What is the standard deviation of this portfolio?

Suppose the risk-free rate is 5%. Compute the slope of the capital allocation lines

for ABC and XYZ. Which of these two stocks yields a higher reward-to-risk ratio?

Your boss claims that you should invest only in the stock with the higher risk-to- reward ratio, and never invest in the stock with the lower risk-to-reward ratio. Do you agree? Explain.