Stocks and standard deviation, math homework help

Stocks and standard deviation, math homework help

Peter and Mary also consider selling the $100,000 of Luna stock and acquire $100,000 of ABC Company common stock instead. ABC stock has exactly the same expected return and standard deviation as Luna stock. Peter comments: “It doesn’t matter whether you keep all of the Luna stock or replace it with $100,000 of ABC stock since the expected returns and standard deviations of the two stocks are exactly the same.” State whether Peter’s comment is correct or incorrect. Justify your response.