You have a portfolio with a standard deviation of 22 % and an expected return of...

90.2K

Verified Solution

Question

Finance

You have a portfolio with a standard deviation of 22 % and anexpected return of 16 %. You are considering adding one of the twoshares in the table below. If after adding the shares you will have20 % of your money in the new shares and 80 % of your money in yourexisting? portfolio, which one should you? add?
Expected
return
Standard
deviation
Correlation with
your? portfolio's returns
Share A
13?%
26?%
0.4
Share B
13?%
16?%
0.6
Standard deviation of the portfolio with share A is
nothing?%.
?(Round to two decimal? places.)
Standard deviation of the portfolio with share B is
nothing?%.
?(Round to two decimal? places.)
Which share should you add and? why????(Select the best choice?below.)
A.
Add Upper A since the portfolio is less risky when Upper A isadded.Add A since the portfolio is less risky when A is added.
B.
Add Upper B because the portfolio is less risky when Upper B isadded.

Answer & Explanation Solved by verified expert

4.1 Ratings (685 Votes)

We have an old portfolio with a standard deviation of 22 and an expected return of 16 We need to add stocks among A or B to the old portfolio 20 of the money will be invested either in A or B and the remaining 80 will be the weight of the old portfolio We will chose the stocks for the which the standard deviation of the new portfolio is lesser See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Transcribed Image Text

You have a portfolio with a standard deviation of 22 % and anexpected return of 16 %. You are considering adding one of the twoshares in the table below. If after adding the shares you will have20 % of your money in the new shares and 80 % of your money in yourexisting? portfolio, which one should you? add?ExpectedreturnStandarddeviationCorrelation withyour? portfolio's returnsShare A13?%26?%0.4Share B13?%16?%0.6Standard deviation of the portfolio with share A isnothing?%.?(Round to two decimal? places.)Standard deviation of the portfolio with share B isnothing?%.?(Round to two decimal? places.)Which share should you add and? why????(Select the best choice?below.)A.Add Upper A since the portfolio is less risky when Upper A isadded.Add A since the portfolio is less risky when A is added.B.Add Upper B because the portfolio is less risky when Upper B isadded.