You have a portfolio with a standard deviation of

25%

and an expected return of

16%.

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	14%	23%	0.2
Stock B	14%	19%	0.5

Question content area bottom

Part 1

Standard deviation of the portfolio with stock A is

enter your response here%.

(Round to two decimal places.)

Part 2

Standard deviation of the portfolio with stock B is

enter your response here%.

(Round to two decimal places.)

Part 3

Which stock should you add and why?(Select the best choice below.)

A.

Add B because the portfolio is less risky when B is added.

B.

Add A because the portfolio is less risky when A is added.

C.

Add either one because both portfolios are equally risky.