You have a portfolio with a standard deviation of 23% and an expected returnof 20%. You are considering adding one of the two stocks in the followingtable. If after adding the stock you will have 25% of your money in the newstock and 75% of your money in your existing portfolio, which one should youadd?Stock AStock BExpectedReturn15%15%StandardDeviation21%18%FFStandard deviation of the portfolio with stock A isdecimal places.)Correlation withYour Portfolio's Returns0.20.6%. (Round to two Standard deviation of the portfolio with stock A is 22.86 %. (Round to twodecimal places.)Standard deviation of the portfolio with stock B is 23.47 %. (Round to twodecimal places.)Which stock should you add and why? (Select the best choice below.)A. Add A because the portfolio is less risky when A is added.B. Add B because the portfolio is less risky when B is added.OC. Add either one because both portfolios are equally risky.

Companies invest their money in different portfolios. Before investing money in any portfolio…

Standard deviation of the portfolio with stock A is 22.86 %. (Round to decimal places.) Standard deviation of the portfolio with stock B is 23.47%. (Round to decimal places.) Which stock should you add and why? (Select the best choice below.) A. Add A because the portfolio is less risky when A is added. B. Add B because the portfolio is less risky when B is added.

Standard deviation of the portfolio with stock A is 22.86 %. (Round to decimal places.) Standard deviation of the portfolio with stock B is 23.47%. (Round to decimal places.) Which stock should you add and why? (Select the best choice below.) A. Add A because the portfolio is less risky when A is added. B. Add B because the portfolio is less risky when B is added.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter2: Risk And Return: Part I

Section: Chapter Questions

Problem 8MC

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