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Potvin Potvin
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7 years ago
George wants to pick a stock for his Diversified Hedge Fund. The fund has holdings in every country with a stock market. George is trying to decide which asset he should add to his portfolio: Stock A or Stock B. Expected return, Standard deviation and beta values for the two stocks are outlined in the table below. Which stock is best for George's portfolio and why?

   Stock A   Stock B   Risk-Free Asset
Expected Return   8%   12%   5%
Standard Deviation   12%   22%   
Beta   1   2   

A) Stock A because it has a lower Beta.
B) Stock A because it has more return per unit of standard deviation.
C) Stock B because it has a higher return.
D) Stock B because it has a higher Treynor Index with respect to standard deviation.
E) Stock B because it has a higher Treynor Index with respect to Beta.
Textbook 
Corporate Finance Online

Corporate Finance Online


Edition: 1st
Authors:
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BlimpBlimp
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7 years ago
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Pol. Sci. Major
Minoring in Business
Columbia University Sophomore

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7 years ago
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