A B C Expected Return 17% 12% 12% Standard Deviation 49% 38% 38% The expected return of the portfolio with stock B is The expected return of the portfolio with stock C is The standard deviation of the portfolio with stock B is The standard deviation of the portfolio with stock C is (Select from the drop-down menu.) You would advise your client to choose Correlation with A 1.00 0.14 0.28 C %. (Round to one decimal place.) %. (Round to one decimal place.) %. (Round to one decimal place.) %. (Round to one decimal place.) because it will produce the portfolio with the lower standard deviation.
A B C Expected Return 17% 12% 12% Standard Deviation 49% 38% 38% The expected return of the portfolio with stock B is The expected return of the portfolio with stock C is The standard deviation of the portfolio with stock B is The standard deviation of the portfolio with stock C is (Select from the drop-down menu.) You would advise your client to choose Correlation with A 1.00 0.14 0.28 C %. (Round to one decimal place.) %. (Round to one decimal place.) %. (Round to one decimal place.) %. (Round to one decimal place.) because it will produce the portfolio with the lower standard deviation.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
#31
Transcribed Image Text:Your client has $102,000 invested in stock A. She would like to build a two-stock portfolio by investing another $102,000 in either stock B or C. She wants a portfolio with
an expected return of at least 14.5% 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
17%
12%
12%
A
B
с
Standard Deviation
49%
38%
38%
Correlation with A
1.00
0.14
0.28
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%. (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.
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