Problem 3: Investments X and Y both offer the same expected rate of return. The standard deviation of X is lower than that of Y's standard deviation. If an investor needs to choose between the two, which investment should he invest in? Problem 4: Investments C and D both offer the same standard deviation. The expected return of C is higher than that of D's expected return. If an investor needs to choose between the two, which investment should she invest in? Problem 5: Suppose the beta of Company A is 0.8, the risk-free rate is 2.7 percent, and the market risk premium is 5.5 percent. Calculate the expected return for Company A.

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A:

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Portfolio Management

Portfolio management is the process by which an investor decides that how the person will invest in a variety of assets in order to get a desired return in the future. A portfolio means a pool of assets that includes securities, bonds, and other investment instruments which helps in risk minimization of the money that has been invested. In other words, it can be said that a portfolio means a combination of assets in which an investor decides to invest their money in order to get a lump sum return in the future or even a series of cash flow that the person is expecting at the end of their job life.