Single stock portfolio / 100 stock portfolio
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Your eccentric uncle died and left you $100,000. However, the will stipulated that the entire amount must be invested in common stocks. Specifically, $50,000 must be invested in a single stock (a one-stock portfolio) and the other $50,000 must be invested in a 100-stock portfolio. You are very risk averse, so you want to minimize the riskiness of each $50,000 investment.
a. Describe the kind of stock you would choose for your single-stock portfolio.
b. What types of stock would you choose the stocks for your 100-stock portfolio?
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Solution Summary
The solution explains which kind of stock to be added in a single stock portfolio and in a 100 stock portfolio.
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a. Describe the kind of stock you would choose for your single-stock portfolio?
If a stock is held alone, then the measure of risk is the standard deviation of returns. Higher the standard deviation, more is the risk. ...
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