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You hold the market portfolio and believe that the risk premium for holding the market portfolio is 5% per year.The risk free rate is 5%.You
You hold the market portfolio and believe that the risk premium for holding the market portfolio is 5% per year.The risk free rate is 5%.You are given the opportunity to invest a small amount in one of two new stock issues: Allied Inc. or Apex Corp.Allied's stock has an annual standard deviation of 40%, a beta of 0.5, and an expected return of 8.0%. Apex's stock has an annual standard deviation of 30%, a beta of 1.0, and an expected return of 9.0%. If you could add at most one stock to your portfolio, which would you add? (3 points)
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