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Your client has $98,000 invested in stock A. She would like to build a two-stock portfolio by investing in another $98,000 in either stock B
Your client has $98,000 invested in stock A. She would like to build a two-stock portfolio by investing in another $98,000 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's expected return and standard deviation?
Expected Return | Standard Deviation | Correlation with A | |
A | 17% | 45% | 1.00 |
B | 13% | 39% | 0.19 |
C | 13% | 39% | 0.32 |
The expected return of the portfolio with stock B %
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