The portfolio expected return and standard deviation

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Reference no: EM132044470

Your client has $101,000 invested in stock A. She would like to build a two-stock portfolio by investing another $101,000 in either stock B or C. She wants a portfolio with an expected return of at least 14.0% 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

A 16% 46% 1.00

B 12% 36% 0.17

C 12% 36% 0.26

The expected return of the portfolio with stock B is ___%.

The expected return of the portfolio with stock C is ___%

The standard deviation of the portfolio with stock B is ____%

The standard deviation of the portfolio with stock C is ____%

You would advise your client to choose ____ because it will produce the portfolio with lower standard deviation.

Reference no: EM132044470

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