You have a portfolio with a standard deviation of 26 % 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 25% of your money in the new stock and of your money in your existing portfolio, which one should you add?

Stock A expected return 14% standard deviation 22% Correlation with Your Portfolio's Returns 0.2

Stock B expected return 14% standard deviation 17% Correlation with Your Portfolio's Returns 0.5

\ Standard deviation of the portfolio with stock A is (Round to two decimal places.)

Part 2 Standard deviation of the portfolio with stock B is Round to two decimal places.)

Part 3 Which stock should you add and why?

A.

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

Your answer is correct.

B.

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

C.

Add either one because both portfolios are equally risky.