You own a portfolio that is composed of stocks and bonds. You decided to add a cryptocurrency to the portfolio. Four major cryptocurrencies are available in the market and they are BTC (Bitcoin), ETH (Ether), XRP (Ripple), and LTC (Litecoin). You are going to allocate 10 percent of the portfolio to only one of these cryptocurrencies. Before investing the funds in a cryptocurrency, you estimated the expected return of the overall portfolio and the standard deviation of returns of the portfolio. The table shows you those numbers (ER means expected return; SD means the standard deviation of returns; RF stands for the risk-free rate of return).
Which combination should you select and why?
RF = 3%
|Original Portfolio + BTC||18%||7%|
|Original Portfolio + ETH||21%||12%|
|Original Portfolio + XRP||34%||20%|
|Original Portfolio + LTC||15%||9%|