Question

Bob investment portfolio consists of several types of stocks, bonds, and money market instruments.  The portfolio

has an overall standard deviation of 12%, a beta of 1.06, and a total return for the year of 11%.  Bob is considering adding one of two alternative investments to his portfolio.  Stock A has a standard deviation of 13%, a beta of 0.87, and a correlation coefficient with the portfolio of 0.6.  Stock B is 11%/0.97/0.95.  Which stock should he add?

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