Question

You are the wealth manager for a family estate, and you manage an all-equity portfolio that currently includes 54 stocks representing many different sectors of the economy. The investment objective of your portfolio is to provide capital gains over the long run while maintaining the portfolio’s current risk level. Using your knowledge of investment selection gained in our class, select the ONE stock from the chart below that would provide the best opportunity to maintain the objective. State why (in 2 sentences or less) you made your selection.

Stock	Historical return (previous year)	Expected return (upcoming year)	Required rate of return	Std dev of returns (annual)	Industry	Beta
A	5.6%	8.1%	9.6%	15.9%	Retail	0.93
B	11.8%	6.2%	6.0%	24.4%	Mining	1.33
C	-2.8%	8.9%	7.8%	31.2%	Financial services	1.17
D	4.6%	4.5%	6.1%	67.9%	Healthcare	1.04
E	15.0%	10.3%	10.1%	49.7%	Biotech	1.56

Answer 1

In order to maintain the objective of "capital appreciation maintain risk level " i i would select Stock A

Reasons

Stock A provides moderately good Positive returns as per the expected forecasting of 8.1% which is aligned with our objective of capital gain.

Stock A has historically performed moderately good in previous years having a positive returns.

The Standard deviation of the stock is lower compared to other stocks with positive returns. It denotes our stock is less risky and aligned with our objective of capital protection from uncertainty .

Lastly stock A is from Retail industry , which is a consumer Cyclical sector and demands are almost stable on retail segment .

Thanks . Please Upvote if you Like :)