Your friend is considering adding one additional stock to a 3-stock portfolio, to form a 4-stock portfolio. She is highly risk averse and has asked for your advice. The three stocks currently held all have b = 1.0, and they are perfectly positively correlated with the market. Potential new Stocks A and B both have expected returns of 15%, are in equilibrium, and are equally correlated with the market, with r = 0.75. However, Stock A's standard deviation of returns is 12% versus 8% for Stock B. Which stock should this investor add to his or her portfolio, or does the choice not matter?
Answers (1)
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “Your friend is considering adding one additional stock to a 3-stock portfolio, to form a 4-stock portfolio. She is highly risk averse and ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers
You Might be Interested in
Charlie is thinking about starting a new business. The company would require $375,000 of assets, and it would be financed entirely with common stock. He will go forward only if he thinks the firm can provide a 11.
Answers (1)
As a politician, you would be more inclined to propose an increase in the minimum wage when you believe that the new minimum wage would:
Answers (1)
Jon is always willing to trade one can of Coke for one can of Sprite, or one can of Sprite for one can of Coke. What can you say about Jon's marginal rate of substitution?
Answers (1)
Increased professionalism in police forces has been made possible by two-way radios, telephones, and automobiles. in what way has society not benefited from this increased professionalism
Answers (1)
Nell is considering forms of business organization for Optic Center, a medical eye clinic. An advantage of a limited liability partnership is that, depending on the applicable state statute, partners can avoid personal liability for a.
Answers (1)
New Questions in Business
The general ledger of Red Storm Cleaners has the following summary of the transactions for the year: 1. March 12 Provide services to customers, $60,000, of which $21,000 is on account. 2. May 2 Collect on accounts receivable, $18,000. 3.
Answers (1)
General Mills conducted focus groups to collect and interpret data to gain insights into customer preferences and loyalty. Which best describes the process General Mills has used? A. Determining the research design B.
Answers (1)
If the reserve ratio is 10%, and banks do not hold excess reserves, when the Fed purchases $10 million of government bonds, bank reservesA) increase by $10 million and the money supply could eventually increase by $10 million.
Answers (1)
What does a clean kitchen show an inspector about a restaurant? a. a clean kitchen shows that the person in charge is working their shift. b. clean kitchens show that the team is healthy and not sick. c.
Answers (1)
Benjamin Company had the following results of operations for the past year: Sales (16,000 units at $10) $ 160,000 Direct materials and direct labor $ 96,000 Overhead (20% variable) 16,000 Selling and administrative expenses (all fixed) 32,000
Answers (1)