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You want to add an additional stock to your portfolio and are considering two alternatives. For stock A, the expected return is 19.50% and the
You want to add an additional stock to your portfolio and are considering two alternatives. For stock A, the expected return is 19.50% and the beta is 1.19. For stock B, the expected return is 14.10% and the beta is 0.95. The risk-free rate is 6.2% and the expected return on the market portfolio is 15.3%. According to the Capital Asset Pricing Model, which statement about adding these securities to your portfolio is most accurate?
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