The stock of Jones Trucking is expected to return 13 percent annually with a standard deviation of

Question:

The stock of Jones Trucking is expected to return 13 percent annually with a standard deviation of 8 percent. The stock of Bush Steel Mills is expected to return 17 percent annually with a standard deviation of 14 percent. The correlation between the returns from the two securities has been estimated to be +0.3. The beta of the Jones stock is 0.9, and the beta of the Bush stock is 1.2. The risk-free rate of return is expected to be 8 percent, and the on the market is 15 percent. The current for Jones is $4. The current for Bush is $6.
a. What is the from a containing the two securities if 40 percent of your wealth is invested in Jones and 60 percent is invested in Bush?
b. What is the expected standard deviation of the of the two stocks?
c. Which stock is the better buy in the current market? Why?

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