Question
You received $5,000 worth of stock ABC as a gift. You also received an additional $5,000 that you must invest in either stock DEF or
You received $5,000 worth of stock ABC as a gift. You also received an additional $5,000 that you must invest in either stock DEF or GHJ. Probability distributions for each stock are shown below.
| Economy | Prob | ABC | DEF | GHJ |
| Recession | 0.1 | -15.00% | -25.00% | 42.00% |
| Below Avg | 0.2 | -3.00% | -7.00% | 30.00% |
| Average | 0.4 | 6.00% | 8.00% | 8.00% |
| Above Avg | 0.2 | 12.00% | 32.00% | -10.00% |
| Boom | 0.1 | 21.00% | 40.00% | -17.00% |
a. Which stock would you choose to combine with ABC in your portfolio? Why?
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Foundations Of Financial Management
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen
18th Edition
126409762X, 9781264097623
