You have pound10000 and are offered two investment products

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You have £10,000 and are offered two investment products by a fund manager. The first product is a portfolio that consists of £6,000 worth of risk free treasury bills and £4,000 worth of QW plc shares. The second product is a portfolio that consists of £1,000 worth of QW plc shares and £9,000 worth of CX plc shares. The following information is available:

Return on treasury bills 4% per annum

(0.04 p.a.)

Expected rate of return on QW plc shares 15% per annum

(0.15 p.a.)

Standard deviation of QW plc shares 0.35

Expected rate of return on CX plc shares 7.7% per annum

(0.077 p.a.)

Standard deviation of CX plc shares 0.15

Correlation coefficient between QW and CX shares 0.40

Which one of these investment portfolios would you choose and why?

Reference no: EM13380564

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