Question

You have a portfolio with a standard deviation of 25 % and an expected return of...

You have a portfolio with a standard deviation of 25 % 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 20 % of your money in the new stock and 80 % of your money in your existing​ portfolio, which one should you​ add?

Expected Return Standard Deviation Correlation w/ Portfolio's returns
Stock A 14% 22% 0.3
Stock B 14% 16% 0.5%

1. Standard deviation of the portfolio with stock A is____
2. Standard deviation of the portfolio with stock B is ____
3. Which stock would you add to your portfolio?

Homework Answers

Answer #1

Solution:

1. The standard deviation of the portfolio with stock A is

---------------------------------------------------------------------------------------------------------------------------------------------------------

2. The standard deviation of the portfolio with stock B is

-----------------------------------------------------------------------------------------------------------------------------------------------------

3. Since the standard deviation of stock A is less, therefore you should add stock A with the portfolio.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
You have a portfolio with a standard deviation of 20 %20% and an expected return of...
You have a portfolio with a standard deviation of 20 %20% and an expected return of 16 %16%. You are considering adding one of the two stocks in the following table. If after adding the stock you will have 25 %25% of your money in the new stock and 75 %75% of your money in your existing​ portfolio, which one should you​ add? Expected Return Standard Deviation Correlation with Your​ Portfolio's Returns Stock A 1515​% 2626​% 0.40.4 Stock B 1515​%...
You have a portfolio with a standard deviation of 26% and an expected return of 18%....
You have a portfolio with a standard deviation of 26% 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 standard deviation correlation with your portfolios return stock a 13% 24% 0.4 stock b 13% 17% 0.6 Standard deviation...
You are creating a portfolio of two stocks. The first one has a standard deviation of...
You are creating a portfolio of two stocks. The first one has a standard deviation of 28% and the second one has a standard deviation of 40%. The correlation coefficient between the returns of the two is 0.3. You will invest 50% of the portfolio in the first stock and the rest in the second stock. What will be the standard deviation of this portfolio's returns? Answer in percent, rounded to two decimal places (e.g., 4.32%=4.32).
You have a two-stock portfolio. One stock has an expected return of 12% and a standard...
You have a two-stock portfolio. One stock has an expected return of 12% and a standard deviation of 24%. The other has an expected return of 8% and a standard deviation of 20%. You invested in these stocks equally (50% of your investment went toward each of the two stocks). If the two stocks are negatively correlated, which one of the following is the most feasible standard deviation of the portfolio? 25% 22% 18% not enough information to determine
Stock 1 has a expected return of 14% and a standard deviation of 12%. Stock 2...
Stock 1 has a expected return of 14% and a standard deviation of 12%. Stock 2 has a expected return of 11% and a standard deviation of 11%. Correlation between the two stocks is 0.5. Create a minimum variance portfolio with long positions in both stocks. What is the return on this portfolio?
You have a stock fund with an expected return of 12% and a standard deviation of...
You have a stock fund with an expected return of 12% and a standard deviation of 22%, a corporate bond fund with an expected return of 6% and a standard deviation of 18% and the risk free rate is 4%. The correlation between the stock and bond funds is 0.15. What is the expected return of the optimal portfolio? Answer in percentage, with one decimal place. Answer:
The following information is available for two stocks: Stock Shares Price per share Expected Return Standard...
The following information is available for two stocks: Stock Shares Price per share Expected Return Standard Deviation A 500 $40 14% 18% B 400 $25 21% 22% You are fully invested in the two stocks. The correlation coefficient between the two stock returns is .80 a. Compute the weights of the two stocks in your portfolio. b. Compute the portfolio expected return. c. Compute the portfolio standard deviation. d. You consider selling 250 shares of stock A, and buy with...
You are creating a portfolio of two stocks. The first one has a standard deviation of...
You are creating a portfolio of two stocks. The first one has a standard deviation of 21% and the second one has a standard deviation of 34%. The correlation coefficient between the returns of the two is 0.2. You will invest 38% of the portfolio in the first stock and the rest in the second stock. What will be the standard deviation of this portfolio's returns? Answer in percent, rounded to two decimal places (e.g., 4.32%=4.32).
Stock X has an expected return of 12% and the standard deviation of the expected return...
Stock X has an expected return of 12% and the standard deviation of the expected return is 20%. Stock Z has an expected return of 7% and the standard deviation of the expected return is 15%. The correlation between the returns of the two stocks is +0.3. These are the only two stocks in a hypothetical world. What is the expected return and the standard deviation of a portfolio consisting of 80% Stock X and 20% Stock Z? Will any...
Stock X has an expected return of 12% and the standard deviation of the expected return...
Stock X has an expected return of 12% and the standard deviation of the expected return is 20%. Stock Z has an expected return of 7% and the standard deviation of the expected return is 15%. The correlation between the returns of the two stocks is +0.3. These are the only two stocks in a hypothetical world. What is the expected return and the standard deviation of a portfolio consisting of 80% Stock X and 20% Stock Z? Will any...