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Suppose your client is going to allocate the same amount of wealth invested in the current...

Suppose your client is going to allocate the same amount of wealth invested in the current portfolio into the new firm of your recommendation, either XiG or TanW.

States of Economy

XiG

TanW

Current

XiG+C

TanW+C

1

6

9

8

             -  

               -  

2

3

2

2

             -  

               -  

3

3

6

7

             -  

               -  

4

4

3

3

             -  

               -  

5

5

1

1

             -  

               -  

Expected Return

Volatility

Which firm should you recommend to incorporate into the current portfolio given that half of the wealth is held in the current portfolio and the remaining half will be invested in the firm you recommend? (Your client is assumed to be risk-averse.)

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