George Stephenson€™s current portfolio of $2 million is invested as follows:

Stephenson soon expects to receive an additional $2 million and plans to invest the entire amount in an index fund that best complements the current portfolio. Stephanie Coppa, CFA, is evaluating the four index funds shown in the following table for their ability to produce a portfolio that will meet two criteria relative to the current portfolio:
(1) Maintain or enhance expected return and
(2) Maintain or reduce volatility.
Each fund is invested in an asset class that is not substantially represented in the current portfolio.

State which fund Coppa should recommend to Stephenson. Justify your choice by describing how your chosen fund best meets both of Stephenson€™s criteria. No calculations arerequired.

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Summary of Stephenson's Current Portfolio Percent of Total Expected Annual Return Annual Standard Deviation Value 1.6% 19.5 29.9 23.1 10% 4.6% Short-term bonds Domestic large-cap equities Domestic small-cap equities Total portfolio 200,000 600,000 1,200,000 12.4 16.0 13.8 60 100% $2,000,000 Index Fund Characteristics Expected Annual Standard Deviation Correlation of Returns with Current Portfolio +0.80 +0.60 +0.90 +0,65 Index Fund Fund A Expected Annual Return 15% 25% Fund B Fund C Fund D 16 14 25