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You already have a very well-diversified portfolio of common stock with a beta of 2, and you want to add stock AAA or BBB into
You already have a very well-diversified portfolio of common stock with a beta of 2, and you want to add stock AAA or BBB into the portfolio. AAAs standard deviation is 0.2300 and its beta is 4. BBBs standard deviation is 0.6500 and its beta is 0.9. Will the addition of AAA increase or decrease the beta and standard deviation of the portfolio? How about the addition of BBB stock?
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