finance problem need to be done fast
Consider the following two stocks. The risk-free rate is 4% and the average stock’s risk premium is 8%.
; ;Stock A ; Stock B
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Beta ; ;1.2 ; 0.7
Standard deviation ; 11% ; 15% ;
a) When you hold a well-diversified portfolio, what stock should you choose to reduce the risk? You should explain.
b) ;If you construct a portfolio that consists of Stock A and Stock B (only two stocks), find the required rate of return on your portfolio.
c) If the expected return on Stock A is 12%, is it good to invest in this stock? You should show your work and explain. ;