Your client has $$100,000$ invested in stock A$.$ She would like to build a$$ two$-$stock portfolio by investing another $$100,000$ in either stock B or C$.$ She wants a portfolio with an expected return of at least $14\mathrm{.}0\%$ and as low a risk as$$ possible, but the standard deviation must be no more than$40\%.$ What do you advise her to$$ do$,$ and what will be the portfolio expected return and standard$$ deviation?

Expected Return

Standard Deviation

Correlation with A

A

$16\%$

$46\%$

$1\mathrm{.}00$

B

$12\%$

$40\%$

$0\mathrm{.}16$

C

$12\%$

$40\%$

$0\mathrm{.}32$

Question content area bottom

Part $1$

The expected return of the portfolio with stock B is