Question
You have a portfolio with a standard deviation of 25% and an expected return of 17%. You are considering adding one of the two stocks
You have a portfolio with a standard deviation of
25%
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 | Standard Deviation | Correlation with Your Portfolio's Returns | |
Stock A | 13% | 25% | 0.3 |
Stock B | 13% | 19% | 0.6 |
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 Upper B because the portfolio is less risky when Upper B is added.
B. Add Upper A because the portfolio is less risky when Upper A is added.
C. Add either one because both portfolios are equally risky.
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