Question
In: Finance
You already have a very well-diversified portfolio of common stock with a beta of 2, and...
You already have a very well-diversified portfolio of common stock with a beta of 2, and you want to add stock AAA or BBB into the portfolio. AAA’s standard deviation is 0.2300 and its beta is 4. BBB’s standard deviation is 0.6500 and its beta is 0.9. Will the addition of AAA increase or decrease the beta and standard deviation of the portfolio? How about the addition of BBB stock?
Solutions
Expert Solution
The addition of AAA will increase beta
and decrease
standard deviation of portfolio.
The addition of BBB will decrease beta
and increase
standard deviation of portfolio.
jeff jeffy answered 2 years agoRelated Solutions
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