You have a portfolio with a standard deviation of 20% 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 30% of your money in the new stock and 70% of your money in your existing portfolio, which one should you add? Standard deviation of the portfolio with stock A is 16.46%. (Round to two decimal places.) Standard deviation of the portfolio with stock B is 18.19%. (Round to two 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. C. Add either one because both portfolios are equally risky. Data table (Click on the following icon in order to copy its contents into a spreadsheet.) Stock A Stock B Expected Return 14% 14% Standard Deviation 21% 18% Correlation with Your Portfolio's Returns 0.2 0.7 - X

You have a portfolio with a standard deviation of 20% 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 30% of your money in the new stock and 70% of your money in your existing portfolio, which one should you add? Standard deviation of the portfolio with stock A is 16.46%. (Round to two decimal places.) Standard deviation of the portfolio with stock B is 18.19%. (Round to two 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. C. Add either one because both portfolios are equally risky. Data table (Click on the following icon in order to copy its contents into a spreadsheet.) Stock A Stock B Expected Return 14% 14% Standard Deviation 21% 18% Correlation with Your Portfolio's Returns 0.2 0.7 - X

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 13P

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