(Computing the expected rate of return and risk) After a tumultuous period in the stock market, Logan Morgan is considering an investment in one of two portfolios. Given the information that follows, which investment is better, based on risk (as measured by the standard deviation) and return as measured by the expected rate of return? Portfolio A Probability 0.15 0.50 0.35 Probability 0.12 0.25 0.38 0.25 (Click on the icon in order to copy its contents into a spreadsheet.) Portfolio B Return - 4% 17% 26% Return 3% 8% 11% 16% a. The expected rate of return for portfolio A is 17 %. (Round to two decimal places.) The standard deviation of portfolio A is 9.72 %. (Round to two decimal places.) b. The expected rate of return for portfolio B is 10.54%. (Round to two decimal places.) The standard deviation for portfolio B is 4.88 %. (Round to two decimal places.)

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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(Computing the expected rate of return and risk) After a tumultuous period in the stock market, Logan Morgan is considering an investment in one of two portfolios. Given the information
that follows, which investment is better, based on risk (as measured by the standard deviation) and return as measured by the expected rate of return?
Probability
0.15
Portfolio A
0.50
0.35
Return
- 4%
17%
26%
Portfolio B
Probability
0.12
0.25
0.38
0.25
(Click on the icon in order to copy its contents into a spreadsheet.)
Return
3%
8%
11%
16%
a. The expected rate of return for portfolio A is 17%. (Round to two decimal places.)
The standard deviation of portfolio A is 9.72 %. (Round to two decimal places.)
b. The expected rate of return for portfolio B is 10.54 %. (Round to two decimal places.)
The standard deviation for portfolio B is 4.88 %. (Round to two decimal places.)
***
Transcribed Image Text:(Computing the expected rate of return and risk) After a tumultuous period in the stock market, Logan Morgan is considering an investment in one of two portfolios. Given the information that follows, which investment is better, based on risk (as measured by the standard deviation) and return as measured by the expected rate of return? Probability 0.15 Portfolio A 0.50 0.35 Return - 4% 17% 26% Portfolio B Probability 0.12 0.25 0.38 0.25 (Click on the icon in order to copy its contents into a spreadsheet.) Return 3% 8% 11% 16% a. The expected rate of return for portfolio A is 17%. (Round to two decimal places.) The standard deviation of portfolio A is 9.72 %. (Round to two decimal places.) b. The expected rate of return for portfolio B is 10.54 %. (Round to two decimal places.) The standard deviation for portfolio B is 4.88 %. (Round to two decimal places.) ***
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