You are currently only invested in the Natasha Fund $($aside from risk$-$free securities$).$ It has an expected return of $15\%$ with a volatility of $21\%.$ Currently, the risk$-$free rate of interest is $3\mathrm{.}8\%.$ Your

broker suggests that you add Hannah Corporation to your portfolio. Hannah Corporation has an expected return of $19\%,$ a volatility of $58\%,$ and a correlation of $0($zero$)$ with the Natasha Fund.

a$.$ Calculate the required return of Hannah stock. Is your broker right?

b$.$ You follow your broker's advice and make a substantial investment in Hannah stock so that, considering only your risky investments, $60\%$ is in the Natasha Fund and $40\%$ is in Hannah stock.

When you tell your finance professor about your investment, he says that you made a mistake and should reduce your investment in Hannah. Recalculate the required return on Hannah stock. Is

your finance professor right?

c$.$ You decide to follow your finance professor's advice and reduce your exposure to Hannah. Now Hannah represents $15\mathrm{.}104\%$ of your risky portfolio, with the rest in the Natasha fund. Recalculate

the required return on Hannah stock. Is this the correct amount of Hannah stock to hold?

Hint: Make sure to round all intermediate calculations to at least five decimal places.

a$.$ Calculate the required return of Hannah stock.

The required return of Hannah stock is $3\mathrm{.}8\%.($Round to one decimal place.$)$

Is your broker right? $($Select from the drop$-$down menu.$)$

Yes $,$ because the expected return of Hannah stock exceeds the required return.

b$.$ You follow your broker's advice and make a substantial investment in Hannah stock so that, considering only your risky investments, $60\%$ is in the Natasha Fund and $40\%$ is in Hannah stock.

When you tell your finance professor about your investment, he says that you made a mistake and should reduce your investment in Hannah. Recalculate the required return on Hannah stock.

$($Round all intermediate values to five decimal places as needed.$)$

The required return of Hannah stock is $28\mathrm{.}51\%.($Round to one decimal place.$)$

Is your finance professor right? $($Select from the drop$-$down menu.$)$

$,$ because the expected return of Hannah stock is less than the required return.

c$.$ You decide to follow your finance professor's advice and reduce your exposure to Hannah. Now Hannah represents $15\mathrm{.}104\%$ of your risky portfolio, with the rest in the Natasha fund. Recalculate

the required return on Hannah stock. $($Round all intermediate values to five decimal places as needed.$)$

The required return of Hannah stock is $\%.($Round to one decimal place.$)$