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?

Hkt Inderx BA Daily Nean 0.000191 0,000826 0,001060 0 048150 0.208028 0.267179 0 122910.127890 0.063331 25. 17% Approx troding days in a year 52 Annualized Variance Std Dev 35 06% 35-76% 1 0.562724 0.6062399 10,3444467 rho- Corr Coeff ABC Corr Coeff vYZ 0.5627243 0.6062399 0: 344447 0. 4352 0 5740 7.74% Expected Narket Return Risk Free Rate 12.00% Beta 2.00% CAPM 12. 00% 6 35% Expected ReturnS.D. 35 8% 25.2% 7.7% 6.4% 344% 2.0% Stock Fund Bond Fund Correlation (p) RRE T-Bills Calcualtion of Expected Return and S.D. of Portfolio: Weight of B at OPTIMUM weight of S at OPTIMUM 62% 38% Calc'd Using Formula. Calcd Using 1-We Weights Portfolio 687% 23 94% 37 65% 62.35%