Solved Question: Your client has $100,000 invested in stock A

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Your client has $100,000 invested in stock A. She would like to build a two-stock portfolio by investing another $100,000 in either stock B or C. She wants a portfolio with an expected return of at least 13.5% and a low a risk as possible, the standard deviation must be no more than 30%. What do you advise her to do (Rationalize your answer), and what will be the expected return and deviation of the recommended portfolio? (Please Show Calculations).

Expected Return Standard Deviation Correlation With A
A 15% 40% 1
B 12% 30% 0.4
C 12% 30% 0.5


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