Question 4 (15 marks) 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? Why? Explain. Expected Return Standard Deviation Correlation with Your Portfolio’s Returns Stock A 15% 25% 0.2 Stock B 15% 20% 0.6
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