Amelia owns $400,000 of a well-diversified mutual fund. She has additional savings of $100,000 that she has decided to invest in additional risky assets. Her current portfolio has an expected return of 10.5% with standard deviation of returns of 22.0%. The investment she is considering purchasing has an expected return of 12% with a standard deviation of 26.4%. If the correlation of returns between Amelia’s current portfolio and the new investment is .85. Should she add this investment?

Answer rating: 100% (QA)

Whether Amelia should add the investment depends on her risk tolerance Heres a breakdown of the info... View the full answer