You have a portfolio with a standard deviation of 30% and an expected return of 18%. You are consideringadding one of the two stocks in the following table. If after adding the stock you will have 20% of your moneyin the new stock and 80% of your money in your existing portfolio, which one should you add?Stock AStock BExpectedReturn15%15%StandardDeviation25%20%Correlation withYour Portfolio's ReturnsXXX0.20.6Standard deviation of the portfolio with stock A is 25.48%. (Round to two decimal places.)Standard deviation of the portfolio with stock B is 26.59 %. (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 because the portfolio is less risky when A is added.OC. Add either one because both portfolios are equally risky.

An investment is claimed to be a risky one if it has a significant change in its value causing…

You have a portfolio with a standard deviation of 30% and an expected return of 18%. 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? Stock A Stock B Expected Return 15% 15% Standard Deviation 25% 20% Correlation with Your Portfolio's Returns 0.2 0.6 Standard deviation of the portfolio with stock A is 25.48%. (Round to two decimal places.) Standard deviation of the portfolio with stock B is 26.59%. (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 because the portfolio is less risky when A is added. OC. Add either one because both portfolios are equally risky.

You have a portfolio with a standard deviation of 30% and an expected return of 18%. 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? Stock A Stock B Expected Return 15% 15% Standard Deviation 25% 20% Correlation with Your Portfolio's Returns 0.2 0.6 Standard deviation of the portfolio with stock A is 25.48%. (Round to two decimal places.) Standard deviation of the portfolio with stock B is 26.59%. (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 because the portfolio is less risky when A is added. OC. 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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