Recent Posts • Latest Topics • Unanswered Questions

A highly risk-averse investor is considering adding one additional stock to a three-stock portfolio, ...

Pois0n

wrote...

Go to Answer

Posts: 151

Rep:

10 months ago

A highly risk-averse investor is considering adding one additional stock to a three-stock portfolio, ...

A highly risk-averse investor is considering adding one additional stock to a three-stock portfolio, to form a four-stock portfolio. The three stocks currently held all have b = 1.0 and a perfect positive correlation with the market. Potential new Stocks A and B both have expected returns of 20%, and both are equally correlated with the market, with r = 0.80. However, Stock A’s standard deviation of returns is 11% versus 15% for Stock B. Which stock should this investor add to their portfolio, or does the choice matter?

▸

either A or B, i.e., the investor should be indifferent as to which of the two

▸

Stock A

▸

Stock B

▸

neither A nor B, as neither has a return sufficient to compensate for risk

Textbook

Financial Management: Theory and Practice

Edition: 4^th

Authors: Brigham, Ehrhardt, Gessaroli, Nason

Read 52 times

1 Reply

Report

Replies

Answer verified by a subject expert

Gab27

wrote...

Posts: 132

Rep:

10 months ago

More solutions for this book are available here

Report

Related Topics

Pois0n Author

wrote...

10 months ago

Thanks for your help!!

joyceess

wrote...

Yesterday

This site is awesome

rileyjones420

wrote...

2 hours ago

Thanks

New Topic

Quick Reply

Explore

Post your homework questions and get free online help from our incredible volunteers

1154 People Browsing

136 Signed Up Today

Start New Topic Take the Tour CoursesNew Study Tools Topics Trending Browse by Textbook

Live Chat

Related Images

1109

292

577

Your Opinion

Previous poll results: How often do you eat-out per week?

It's sore throat season, why does my mucus have red spots?

Strange Ingredients Lurking in Doritos Chips

The Toxic Skin and Fungi Defense

Courses by Biology Forums

Bonobos, Chimpanzees, and the 98% DNA Link

Ready to ask a question on Biology Forums? Try it out

Join Our Community

Biology Forums - Study Force is a free online homework help service catered towards college and high school students. Get homework help and answers to your toughest questions in biology, chemistry, physics, mathematics, engineering, accounting, business, humanities, and more. Master your assignments quickly with thousands of step-by-step solutions to countless textbook questions asked and answered by our members. If we don't have your question, don't worry. You can ask any homework question and get expert homework help in as little as two hours.

Our extensive online study community is made up of college and high school students, teachers, professors, parents and subject enthusiasts who contribute to our vast collection of study resources: textbook solutions, study guides, practice tests, practice problems, lecture notes, equation sheets and more. With our help, your homework will never be the same!

Join for free today

How is Biology Forums - Study Force different than tutoring?

Home Search Q & A Board Gallery Resource Library Blog Dictionary Chat 1	Quick Links Start a Topic Latest Topics Unanswered Questions Courses Study Tools Browse by Textbook	Social Facebook YouTube Community Stats Who's Online Trending Staff	Help About Us Take the Tour Study Tips Posting Guidelines Terms and Policies Contact Us
Biology Forums - Study Force © 2010-2024 \| Powered by SMF \| SMF © 2015, Simple Machines \| Sitemap Biology-Forums.com is not affiliated with any publisher. Book covers, title and author names appear for reference only.