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 15% 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’s expected return and standard deviation?

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AB C Expected Return 17% 13% 13% Standard Deviation 49% 37% 37% Correlation with A 1 0.14 0.33