Question
Your client has $98,000 invested in stock A. She would like to build a two-stock portfolio by investing another $98,000 in either stock B or
Your client has $98,000 invested in stock A. She would like to build a two-stock portfolio by investing another $98,000 in either stock B or C. She wants a portfolio with an expected return of at least 14.0% 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 | 15% | 49% | 1.00 |
B | 13% | 38% | 0.12 |
C | 13% | 38% | 0.28 |
The expected return of the portfolio with stock B is ?%.
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Business Statistics A First Course
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9780321998217, 032197901X, 321998219, 978-0321979018
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