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You have a portfolio with a standard deviation of 20% and an expected return of 17%. You are considering adding one of the two stocks

You have a portfolio with a standard deviation of 20% 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 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 Portfolio's Returns

Stock A

13%

26%

0.4

Stock B

13%

19%

0.5

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Part 1

Standard deviation of the portfolio with stock A is

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