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You have a portfolio with a standard deviation of 27% and an expected return of 16%. You are considering adding one of the two stocks
You have a portfolio with a standard deviation of 27% 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 your existing portfolio, which one should you add? Expected Standard Correlation with Return Deviation Your Portfolio's Returns Stock A 13% 23% 0.2 Stock B 13% 18% 0.6 Standard deviation of the portfolio with stock Ais %. (Round to two decimal places.) Standard deviation of the portfolio with stock Bis%. (Round to two decimal places.) Which stock should you add and why? (Select the best choice below.) O A. Add B because the portfolio is less risky when B is added. OB. Add A because the portfolio is less risky when A is added. O c. Add either one because both portfolios are equally risky
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