Your client has $95,000 invested in stock A. She would like to build a two-stock portfolio by investing another $95,000 in either stock B or C. She wants a portfolio with an expected return of at least 14.5% and as low a risk as possible, but thestandard 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 ReturnStandard DeviationCorrelation with AA17%47%1.0012%38%0.1412%38%0.27The 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.)(Select from the drop-down menu.)You would advise your client to choosebecause it will produce the portfolio with the lower standard deviation.stock Bstock C

Required:Advise the client which stock to choose for the portfolio, the expected portfolio return,…

Your client has $95,000 invested in stock A. She would like to build a two-stock portfolio by investing another $95,000 in either stock B or C. She wants a portfolio with an expected return of at least 14.5% 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 47% 38% 38% A 17% 1.00 B 12% 0.14 12% 0.27 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.) (Select from the drop-down menu.) You would advise your client to choose because it will produce the portfolio with the lower standard deviation. stock B stock C

Your client has $95,000 invested in stock A. She would like to build a two-stock portfolio by investing another $95,000 in either stock B or C. She wants a portfolio with an expected return of at least 14.5% 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 47% 38% 38% A 17% 1.00 B 12% 0.14 12% 0.27 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.) (Select from the drop-down menu.) You would advise your client to choose because it will produce the portfolio with the lower standard deviation. stock B stock C

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter6: Risk And Return

Section: Chapter Questions

Problem 6MC: Your client is shocked at how much risk Blandy stock has and would like to reduce the level of risk....

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