Question
You have a portfolio with a standard deviation of 30% and an expected return of 20%. You are considering adding one of the two
You have a portfolio with a standard deviation of 30% 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 20% of your money in the new stock and 80% of your money in your existing portfolio, which one should you add? Expected Correlation with Stock A Standard Return Deviation Your Portfolio's Returns 12% 24% Stock B 12% 16% 0.2 0.7 Standard deviation of the portfolio with stock A is 18.4 %. (Round to two decimal places.)
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Fundamentals of Corporate Finance
Authors: Berk, DeMarzo, Harford
2nd edition
132148234, 978-0132148238
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