Your client has $100,000 invested in stock A. She would like to build a two-stock portfolio by
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Question:
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
14.5%
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 | 15% | 48% | 1.00 |
B | 14% | 36% | 0.11 |
C | 14% | 36% |
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