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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
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 15.0% 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 17% 45% 1.00 B 13% 38% 0.19 13% 38% 0.34 The expected return of the portfolio with stock B is %. (Round to one decimal place.) The expected return of the portfolio with stock C is %. (Round to one decimal place.) The standard deviation of the portfolio with stock B is %. (Round to one decimal place.) The standard deviation of the portfolio with stock C is 1%. (Round to one decimal place.) (Select from the drop-down menu.) You would advise your client to choose because it will produce the portfolio with the lower standard deviation. stock B stock C
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