Your client has $103,000 invested in stock A. She would like to build a two-stock portfolio by investing another $103,000 in either stock B or C. She wants a portfolio with an expect 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? A B C Expected Return 17% 12% 12% Standard Deviation 47% 38% 38% Correlation with A 1.00 0.15 0.32
Your client has $103,000 invested in stock A. She would like to build a two-stock portfolio by investing another $103,000 in either stock B or C. She wants a portfolio with an expect 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? A B C Expected Return 17% 12% 12% Standard Deviation 47% 38% 38% Correlation with A 1.00 0.15 0.32
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 $103,000 invested in stock A. She would like to build a two-stock portfolio by investing another $103,000 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?
A
B
C
Expected Return
17%
12%
12%
Standard Deviation
Calculate the standard deviation of stocks B&C
47%
38%
38%
c
Correlation with A
1.00
0.15
0.32
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