Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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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 13.5% 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?
ABC
Expected Return
15%
12%
12%
Standard Deviation
50%
36%
36%
Correlation with A
1.00
0.18
0.31
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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 13.5% 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? ABC Expected Return 15% 12% 12% Standard Deviation 50% 36% 36% Correlation with A 1.00 0.18 0.31
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