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6. Stocks A and B have the following returns: Stock A 0.08 0.07 0.13 -0.02 Stock B 0.06 0.01 0.05 0.02 -0.05 0.09 a. What

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6. Stocks A and B have the following returns: Stock A 0.08 0.07 0.13 -0.02 Stock B 0.06 0.01 0.05 0.02 -0.05 0.09 a. What are the expected returns of the two stocks? b. What are the standard deviations of the returns of the two stocks? c. If their correlation is 0.44, what is the expected return and standard deviation of a portfolio of 71% stock A and 29% stock B? a. What are the expected returns of the two stocks? The expected return for stock A is . (Round to three decimal places.) The expected return for stock B is (Round to three decimal places.) b. What are the standard deviations of the returns of the two stocks? The standard deviation of the return for stock A is . (Round to four decimal places.) The standard deviation of the return for stock B is (Round to four decimal places.) c. If their correlation is 0.44, what is the expected return and standard deviation of a portfolio of 71% stock A and 29% stock B? The expected return for the portfolio is (Round to four decimal places.) The standard deviation of the return for the portfolio is (Round to four decimal places.) 7. You have a portfolio with a standard deviation of 21% and an expected return of 17%. You are considering adding one of the two stocks in the following table. If after adding the stock you will have 30% of your money in the new stock and 70% of your money in your existing portfolio, which one should you add? Expected Return 13% 13% Standard Deviation 23% 18% Correlation with Your Portfolio's Returns 0.2 0.5 Stock A Stock B Standard deviation of the portfolio with stock A is %. (Round to two decimal places.) Standard deviation of the portfolio with stock B is %. (Round to two decimal places.) Which stock should you add and why? (Select the best choice below.) O A. Add A because the portfolio is less risky when A is added. OB. Add B because the portfolio is less risky when B is added. c. Add either one because both portfolios are equally risky

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