Question: 26. Your client has $101,000 invested in stock A. She would like to build a two-stock portfolio by investing another $101,000 in either stock B
26. Your client has $101,000 invested in stock A. She would like to build a two-stock portfolio by investing another $101,000 in either stock B or C. She wants a portfolio with an expected return of at least 14.5% 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 expected return and standard deviation
| Expected Return | Standard Deviation | Correlation with A | |
| A | 16% | 45% | 1.00 |
| B | 13% | 38% | 0.12 |
| C | 13% | 38% | 0.31 |
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