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The stock of Jones Trucking is expected to return 17 percent annually with a standard...

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Accounting

The stock of Jones Trucking is expected to return 17 percent annually with a standard deviation of 6 percent. The stock of Bush Steel Mills is expected to return 18 percent annually with a standard deviation of 12 percent. The correlation between the returns from the two securities has been estimated to be +0.2. The beta of the Jones stock is 1.1, and the beta of the Bush stock is 1.4. The risk-free rate of return is expected to be 5 percent, and the expected return on the market portfolio is 15 percent. The current dividend for Jones is $5. The current dividend for Bush is $7.

What is the expected return from a portfolio containing the two securities if 50 percent of your wealth is invested in Jones and 50 percent is invested in Bush? Round your answer to one decimal place. %

What is the expected standard deviation of the portfolio of the two stocks? Round your answer to two decimal places. %

Which stock is the better buy in the current market? Round your answers to one decimal place.

Required return (Jones): %

Required return (Bush): %

The ------ (Jones or Bush) stock is the better buy because the expected return is ---- (Lower or higher) than the required return.

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