18. You have a portfolio with a standard deviation of 30% and an expected return of...

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18. 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? Expected Return Correlation with Your Standard Deviation Portfolio's Returns Stock A 15% 25% Stock B 15% 20% 0.2 0.6 8. Stocks A and B have the following returns (see MyFinanceLab for the data in Excel format): Stock A Stock B 1 0.10 0.06 2 0.07 0.02 3 0.15 0.05 4 -0.05 0.01 5 0.08 -0.02 a. What are the expected returns of the two stocks? b. What are the standard deviations of the returns of the two stocks? c. If their correlation is 0.46, what is the expected return and standard deviation of a portfolio of 70% stock A and 30% stock B? 18. 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? Expected Return Correlation with Your Standard Deviation Portfolio's Returns Stock A 15% 25% Stock B 15% 20% 0.2 0.6 8. Stocks A and B have the following returns (see MyFinanceLab for the data in Excel format): Stock A Stock B 1 0.10 0.06 2 0.07 0.02 3 0.15 0.05 4 -0.05 0.01 5 0.08 -0.02 a. What are the expected returns of the two stocks? b. What are the standard deviations of the returns of the two stocks? c. If their correlation is 0.46, what is the expected return and standard deviation of a portfolio of 70% stock A and 30% stock B?

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To solve this problem we need to follow these steps 1 Determine which stock you should add to your e... View the full answer