You have a portfolio with a standard deviation of 29% and an expected return of 19%. 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% ofyour money in your existing portfolio, which one should you add?ExpectedReturnStandardCorrelation withDeviationYour Portfolio's ReturnsStock A16%23%0.4Stock B16%16%0.5Standard deviation of the portfolio with stock A is%. (Round to two decimal places.)Standard deviation of the portfolio with stock B is%. (Round to two decimal places.)Which stock should you add and why? (Select the best choice below.)A. Add B because the portfolio is less risky when B is added.B. Add A since the portfolio is less risky when A is added.C. Add either one because both portfolios are equally risky.

given, rp=19%σp=29%wp=0.8wstock=0.2

You have a portfolio with a standard deviation of 29% and an expected return of 19%. 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 16% 16% 23% 0.4 Stock B 16% 0.5 Standard deviation of the portfolio with stock A is%. (Round to two decimal places.) Standard deviation of the portfolio with stock B is %. (Round to two decimal places.) Which stock should you add and why? (Select the best choice below.) O A. Add B because the portfolio is less risky when B is added. O B. Add A since the portfolio is less risky when A is added. O C. Add either one because both portfolios are equally risky.

You have a portfolio with a standard deviation of 29% and an expected return of 19%. 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 16% 16% 23% 0.4 Stock B 16% 0.5 Standard deviation of the portfolio with stock A is%. (Round to two decimal places.) Standard deviation of the portfolio with stock B is %. (Round to two decimal places.) Which stock should you add and why? (Select the best choice below.) O A. Add B because the portfolio is less risky when B is added. O B. Add A since the portfolio is less risky when A is added. O C. Add either one because both portfolios are equally risky.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 25P

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