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?
Find 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 you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers
You Might be Interested in
You invest in a piece of equipment costing $40,000. The equipment will be used for two years, and it will be worth $15,000 at the end of two years. The machine will be used for 4,000 hours during the first year and 6,000 hours during the second year.
Answers (1)
When one enters a $50,000 credit entry to the Land account in a spreadsheet for the statement of cash flows, it represents a negative change in that account and probably is due to selling such assets. True or False
Answers (1)
Tivo has a great brand. why hasn't it profitably dominated the market for digital video recorders?
Answers (1)
Does gross profit take into account taxes
Answers (1)
Larceny is easier to detect than skimming because: a. larcenies can take place in any circumstance in which an employee has access to cash. b. larceny involves stealing cash after it has already been recorded in the company's accounting system. c.
Answers (1)
New Questions in Business
After Sunshine Systems merged with RTD Enterprises, company executives noticed that due to increased employee collaboration between the two units, costs were down and revenues increased within both areas.
Answers (1)
When the consumer price index rises, the typical family a. has to spend more dollars to maintain the same standard of living. b. can spend fewer dollars to maintain the same standard of living. c. finds that its standard of living is not affected. d.
Answers (1)
A magazine subscription costs $45 per year at the beginning of each year, or $115 now for a three-year subscription. If the subscriber elects to pay the $115 now, the rate of return on the investment will be nearest to:
Answers (2)
The second step in rational decision making is to: choose the solution that maximizes value. identify the criteria that are important in making the decision. evaluate the alternatives. implement the alternative.
Answers (1)
What impact will a spike in wages cause to the labor demand curve?
Answers (1)