HW3.dvi

You have a portfolio with a standard deviation of 30% and an expected return of 18%. You are considering adding one of the two stocks in the following table. If after adding the stock you will have 20% of your money in the new stock and 80% of your money in your existing portfolio, which one should you add?

Expected Return Standard Deviation Correlation with Your Portfolios Returns

Stock A 15% 25% 0.2

Stock B 15% 20% 0.6

PLEASE SHOW SOLUTION STEP BY STEP