Question: 9. You are currently holding stock A which has expected return of 10% and standard deviation of 3%. You would like to add one of

9. You are currently holding stock A which has expected return of 10% and standard deviation of 3%. You would like to add one of the following two stocks (so you would like to have a portfolio with two stocks): BTC 10% 4% 10% 2% (r) (i) a. Which stock should you buy assuming that all three stocks are uncorrelated and you can only purchase one of the stocks B or C? b. Now assume that P(A,B) = 0.5 and P(A,C) = 0. Which stock will you buy now? c. Now assume that p(A,C) = -1 and you are investing only in stocks A and C. What are the optimal weights of stocks A and C in your portfolio? If there is a risk free rate in the market, what is the risk free return

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