Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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You have a portfolio with a standard deviation of 23% and an expected return of 15%. You are considering adding one of the two stocks in the following table. If after adding the stock you will have
25% of your money in the new stock and 75% of your money in your existing portfolio, which one should you add?
Stock A
Stock B
Expected
Return
15%
15%
Standard
Deviation
24%
20%
Standard deviation of the portfolio with stock A is
Correlation with
Your Portfolio's Returns
0.2
0.6
%. (Round to two decimal places.)
%. (Round to two decimal places.)
Standard deviation of the portfolio with stock B is
Which stock should you add and why? (Select the best choice below.)
Text
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.
Next
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Transcribed Image Text:You have a portfolio with a standard deviation of 23% and an expected return of 15%. You are considering adding one of the two stocks in the following table. If after adding the stock you will have 25% of your money in the new stock and 75% of your money in your existing portfolio, which one should you add? Stock A Stock B Expected Return 15% 15% Standard Deviation 24% 20% Standard deviation of the portfolio with stock A is Correlation with Your Portfolio's Returns 0.2 0.6 %. (Round to two decimal places.) %. (Round to two decimal places.) Standard deviation of the portfolio with stock B is Which stock should you add and why? (Select the best choice below.) Text 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. Next
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