You have a client who wishes to have a portfolio with a rate of return of (expected) 10%. What mix of two of your two stocks and of money market funds (paying 2%) or margin borrowing (cost = 7%) would you recommend?BA or XON Explain why?

Mkt Index BA 0.048150-0.208028 35 . 76% XON 0.000191-0.000826 0,001060 0.267179 0.122910 0.127890 0.063331 25 . 17% Daily Mean Annualized Variance Std Dev 252 Ox trading days in a year 35-06% Corr Coeff W MKT 1 0.562724 0.6062399 1 0.3444467 0.5627243 0.6062399 Corr Coeff XYZ 0.344447 0.5740 7, 74% 0.4352 6.35% pected Harket Return Risk Free Rate 12.00% Beta 2.00% CAPM 12-00% Expected Return 7.7% 6.4% 34.4% 2.0% S.D. 35.8% 25.2% Stock Fund Bond Fund Correlation ( ) RRF T-Bills Calc ualtion of Expected Return an d S.D. of Portfolio: Weight of B at OPTIMUMM Weight of S at OPTIMUM 62% 3896 Calc'd Using Formula Calc'd Using i-WB Weights Portfolio: BAXON Er S.D. Mkt Index BA 0.048150-0.208028 35 . 76% XON 0.000191-0.000826 0,001060 0.267179 0.122910 0.127890 0.063331 25 . 17% Daily Mean Annualized Variance Std Dev 252 Ox trading days in a year 35-06% Corr Coeff W MKT 1 0.562724 0.6062399 1 0.3444467 0.5627243 0.6062399 Corr Coeff XYZ 0.344447 0.5740 7, 74% 0.4352 6.35% pected Harket Return Risk Free Rate 12.00% Beta 2.00% CAPM 12-00% Expected Return 7.7% 6.4% 34.4% 2.0% S.D. 35.8% 25.2% Stock Fund Bond Fund Correlation ( ) RRF T-Bills Calc ualtion of Expected Return an d S.D. of Portfolio: Weight of B at OPTIMUMM Weight of S at OPTIMUM 62% 3896 Calc'd Using Formula Calc'd Using i-WB Weights Portfolio: BAXON Er S.D