Question

Syntex, Inc. is considering an investment in one of two common stocks. Given the information that​ follows, which investment is​ better, based on the risk​ (as measured by the standard​ deviation) and​ return?

Common Stock A		Common Stock B
Probability	Return	Probability	Return
0.20	12​%	0.15	−7%
0.60	14​%	0.35	5​%
0.20	18​%	0.35	13​%
		0.15	21​%

 A. Given the information in the​ table, the expected rate of return for stock A is _____ ​(Round to two decimal​ places.)

The standard deviation of stock A is ___​(Round to two decimal​ places.)

b.  The expected rate of return for stock B is ____(Round to two decimal​ places.)

The standard deviation for stock B is _____ ​(Round to two decimal​ places.)

c.  Based on the risk​ (as measured by the standard​ deviation) and return of each​ stock, which investment is​ better?  ​(Select the best choice​ below.)

A. Stock A is better because it has a higher expected rate of return with less risk.

B. Stock B is better because it has a lower expected rate of return with more risk.  

Answer 1

Calculations-

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