An investor is trying to decide between Portfolio ST and Portfolio BT. Portfolio ST comprises of stocksfrom the tech, financial and construction industry, while Portfolio BT includes stock from tech and financial industries only. The table below contains information on both portfolios. Which portfolio is the optimal portfolio considering the threshold level? Why do you think portfolio BT has a higher standard deviation than portfolio ST?
An investor is trying to decide between Portfolio ST and Portfolio BT. Portfolio ST comprises of stocksfrom the tech, financial and construction industry, while Portfolio BT includes stock from tech and financial industries only. The table below contains information on both portfolios. Which portfolio is the optimal portfolio considering the threshold level? Why do you think portfolio BT has a higher standard deviation than portfolio ST?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
An investor is trying to decide between Portfolio ST and Portfolio BT. Portfolio ST comprises of stocksfrom the tech, financial and construction industry, while Portfolio BT includes stock from tech and financial industries only. The table below contains information on both portfolios.
- Which portfolio is the optimal portfolio considering the threshold level?
- Why do you think portfolio BT has a higher standard deviation than portfolio ST?
![Portfolio
ST
Portfolio
BT
Mean
returns
25%
20%
Standard
Deviation
15%
19%
Expected Returns Threshold level
R(P)
R(L)
10%
21%
18%
10%](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fb509e25c-53e2-4f85-a90f-38d480d4f0c7%2F7c06cbf5-ad35-40b4-836e-5adf39dc1042%2F1iyova_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Portfolio
ST
Portfolio
BT
Mean
returns
25%
20%
Standard
Deviation
15%
19%
Expected Returns Threshold level
R(P)
R(L)
10%
21%
18%
10%
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