Your client has

$103,000

invested in stock A. She would like to build a two-stock portfolio by investing another

$103,000

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	16%	50%	1.00
B	14%	35%	0.18
C	14%	35%	0.35

Question content area bottom

Part 1

The expected return of the portfolio with stock B is

enter your response here%.

(Round to one decimal place.)

Part 2

The expected return of the portfolio with stock C is

enter your response here%.

(Round to one decimal place.)

Part 3

The standard deviation of the portfolio with stock B is

enter your response here%.

(Round to one decimal place.)

Part 4

The standard deviation of the portfolio with stock C is

enter your response here%.

(Round to one decimal place.)

Part 5

(Select from the drop-down menu.)

You would advise your client to choose

stock B

stock C

because it will produce the portfolio with the lower standard deviation.