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In: Finance

You have a portfolio with a standard deviation of 21% and an expected return of 16%....

You have a portfolio with a standard deviation of 21% 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 in your existing portfolio, which one should you add?

Expected

Return

Standard

Deviation

Correlation with

Your Portfolio's Returns

Stock A

12%

25%

0.2

Stock B

12%

17%

0.5

What is the Standard deviation of the portfolio with stock A?

What is the Standard deviation of the portfolio with stock B?

Expert Solution

Calculations-

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jeff jeffy answered 1 year ago

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