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You have a portfolio with a standard deviation of 26% and an expected return of 20%. You are considering adding one of the two stocks
You have a portfolio with a standard deviation of 26% and an expected return of 20%. 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? Correlation with Your Portfolio's Returns Expected Return 12% 12% Standard Deviation 21% 18% 0.3 Stock A Stock B 0.7 Standard deviation of the portfolio with stock A is %. (Round to two decimal places.) Standard deviation of the portfolio with stock B is %. (Round to two decimal places.) 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
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