(Expected rate of return and risk) 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 Probability 0.20 0.60 0.20 Return 13% 17% 18% Common Stock B Probability 0.10 0.40 0.40 0.10 (Click on the icon in order to copy its contents into a spreadsheet) Return -7% 5% 16% 21% a. Given the information in the table, the expected rate of return for stock A is 16.40 %. (Round to two decimal places.) The standard deviation of stock A is 1.74 %. (Round to two decimal places.) b. The expected rate of return for stock B is 9.8 %. (Round to two decimal places.) The standard deviation for stock B is 6.12%. (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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(Expected rate of return and risk) 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
Probability
0.20
0.60
0.20
Common Stock B
Return
13%
17%
18%
Probability
0.10
0.40
0.40
0.10
(Click on the icon in order to copy its contents into a spreadsheet.)
Return
-7%
5%
16%
21%
www
a. Given the information in the table, the expected rate of return for stock A is 16.40 %. (Round to two decimal places.)
The standard deviation of stock A is 1.74 %. (Round to two decimal places.)
b. The expected rate of return for stock B is 9.8 %. (Round to two decimal places.)
The standard deviation for stock B is 6.12 %. (Round to two decimal places.)
Transcribed Image Text:K (Expected rate of return and risk) 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 Probability 0.20 0.60 0.20 Common Stock B Return 13% 17% 18% Probability 0.10 0.40 0.40 0.10 (Click on the icon in order to copy its contents into a spreadsheet.) Return -7% 5% 16% 21% www a. Given the information in the table, the expected rate of return for stock A is 16.40 %. (Round to two decimal places.) The standard deviation of stock A is 1.74 %. (Round to two decimal places.) b. The expected rate of return for stock B is 9.8 %. (Round to two decimal places.) The standard deviation for stock B is 6.12 %. (Round to two decimal places.)
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