The manager of a large and diversified portfolio is considering an incremental change to the portfolio....

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The manager of a large and diversified portfolio is considering an incremental change to the portfolio. However, after narrowing her choices down to Table 1, she is perplexed. She claims that "a law of finance - risks and return are matched - is certainly broken!" Table 1: incremental investment choices 100-stock index BigPipe Tobacco Annual Return (%) 9 7.6 Standard Deviation (%) 5.4 6.5 In 1-2 paragraphs, comment on the manager's statement, is she incorrect? Clearly state any assumptions or theories relied upon. The manager of a large and diversified portfolio is considering an incremental change to the portfolio. However, after narrowing her choices down to Table 1, she is perplexed. She claims that "a law of finance - risks and return are matched - is certainly broken!" Table 1: incremental investment choices 100-stock index BigPipe Tobacco Annual Return (%) 9 7.6 Standard Deviation (%) 5.4 6.5 In 1-2 paragraphs, comment on the manager's statement, is she incorrect? Clearly state any assumptions or theories relied upon.

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The managers statement that the law of finance risks and return are matched is certainly broken is n... View the full answer