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What will be the expected return and standard deviation

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Reference no: EM132965854

Question - Your client has $80,000 invested in stock A. She would like to build a two-stock portfolio by investing another $80,000 in either stock B or C. She wants a portfolio with an expected return of at least 15% and as low a risk as possible. The standard deviation must be no more than 25%.

 

Expected Return

Standard Deviation

Correlation with A

A

18%

30%

1.0

B

17%

25%

0.3

C

15%

15%

0.4

Required -

a. Which stock should she add. B or C?

b. What will be the expected return and standard deviation of the recommended portfolio?

Reference no: EM132965854

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