Your client has $96,000 invested in stock A. She would like to build a? two-stock portfolio...

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Finance

Your client has $96,000 invested in stock A. She would like tobuild a? two-stock portfolio by investing another $96,000 in eitherstock B or C. She wants a portfolio with an expected return of atleast 14.5% and as low a risk as? possible, but the standarddeviation 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
A
15?%
49?%
1.00
B
14?%
39?%
0.12
C
14?%
39?%
0.26
The expected return of the portfolio with stock B is??????%.?(Round to one decimal? place.)
The expected return of the portfolio with stock C is???????%.?(Round to one decimal? place.)
The standard deviation of the portfolio with stock B is???????%.?(Round to one decimal? place.)
The standard deviation of the portfolio with stock C is?????%.?(Round to one decimal? place.)
You would advise your client to choose stock B? or stock C?because it will produce the portfolio with the lower standarddeviation.??

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3.6 Ratings (627 Votes)

Please find below the necessary replies If additional 96000 is invested in Stock B Weight of A WA 50 Weight of B WB 50 Since 96000 already invested in stock A and equal amount of 96000 is being invested stock B Expected return of A RA 15 Expected return of B RB 14 Standard Deviation of A A 49 Standard Deviation of B B 39 See Answer

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Your client has $96,000 invested in stock A. She would like tobuild a? two-stock portfolio by investing another $96,000 in eitherstock B or C. She wants a portfolio with an expected return of atleast 14.5% and as low a risk as? possible, but the standarddeviation 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 ReturnStandard DeviationCorrelation with AA15?%49?%1.00B14?%39?%0.12C14?%39?%0.26The expected return of the portfolio with stock B is??????%.?(Round to one decimal? place.)The expected return of the portfolio with stock C is???????%.?(Round to one decimal? place.)The standard deviation of the portfolio with stock B is???????%.?(Round to one decimal? place.)The standard deviation of the portfolio with stock C is?????%.?(Round to one decimal? place.)You would advise your client to choose stock B? or stock C?because it will produce the portfolio with the lower standarddeviation.??

	Expected Return	Standard Deviation	Correlation with A
A	15?%	49?%	1.00
B	14?%	39?%	0.12
C	14?%	39?%	0.26