Your client has $97,000 invested in stock A. She would like to build a two-stock portfolio by investing another $97,000 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 Standard Correlation with A 15% 1.00 14% 0.15 0.35 14% A B C Deviation 49% 35% 35% The expected return of the portfolio with stock B is %. (Round to one decimal place.)
Your client has $97,000 invested in stock A. She would like to build a two-stock portfolio by investing another $97,000 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 Standard Correlation with A 15% 1.00 14% 0.15 0.35 14% A B C Deviation 49% 35% 35% The expected return of the portfolio with stock B is %. (Round to one decimal place.)
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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Transcribed Image Text:Your client has $97,000 invested in stock A. She would like to build a two-stock portfolio by investing another $97,000 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
Standard Deviation
Correlation with A
15%
14%
14%
A
B
C
49%
35%
35%
The expected return of the portfolio with stock B is
1.00
0.15
0.35
%. (Round to one decimal place.)
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