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% 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 standarddeviation?

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Expected Return 15% 13% 13% Standard Deviation 50% 40% 40% Correlation with A 0.2 0.3