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
Research conducted on firms' dividend policies over time support which one of the following conclusions? A. Aggregate dividends and stock repurchases have steadily declined in real terms. B. Dividends are currently paid by the vast majority of firms.
Answers (1)
Select all that apply. Negative personality traits include the following: controlling humble rude impatient
Answers (1)
A widely used activity base for developing factory overhead rates in highly automated settings is a. machine hours b. direct materials c. direct labor hours d. direct labor dollars
Answers (1)
Foyert Corp. requires a minimum $6,800 cash balance. If necessary, loans are taken to meet this requirement at a cost of 1% interest per month (paid monthly). Any excess cash is used to repay loans at month-end.
Answers (1)
ne day, Barry the Barber, Inc., collects $400 for haircuts. Over this day, his equipment depreciates in value by $50.
Answers (1)
New Questions in Business
Property taxes and fines represent which of the following classes of nonexchange transactions for government units? Group of answer choices Government-mandated nonexchange transactions.
Answers (1)
You want to go to Europe 5 years from now, and you can save $3,100 per year, beginning one year from today. You plan to deposit the funds in a mutual fund which you expect to return 8.5% per year.
Answers (1)
Pacific Packaging's ROE last year was only 6%; but its management has developed a new operating plan that calls for a debt-to-capital ratio of 40%, which will result in annual interest charges of $336,000.
Answers (1)
Joe has $100,000 in an investment account. He is looking to retire in 12 years. He needs a minimum of $240,000 in order to retire. What rate of return does Joe need to make on his investment in order to be able to retire?
Answers (1)
Toombs Media Corp. recently completed a 3-for-1 stock split. Prior to the split, its stock sold for $160 per share. The firm's total market value was unchanged by the split.
Answers (1)