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You have a portfolio with a standard deviation of 25 % and an expected return of 15 %. You are considering adding one of the
You have a portfolio with a standard deviation of 25 % and an expected return of 15 %. 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 w/ Portfolio's returns | |
Stock A | 14% | 22% | 0.3 |
Stock B | 14% | 16% | 0.5% |
1. Standard deviation of the portfolio with stock A is____ 2. Standard deviation of the portfolio with stock B is ____ 3. Which stock would you add to your portfolio?
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