The riskier stock from the two stocks and reason.

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 0.25 13% 0.25 −7% 0.50 14% 0.25 7% 0.25 18% 0.25 16% 0.25 23% (Click on the icon in order to copy its contents into a spreadsheet.) Question content area bottom Part 1 a. Given the information in the table, the expected rate of return for stock A is enter your response here %. (Round to two decimal places.) Part 2 The standard deviation of stock A is enter your response here %. (Round to two decimal places.) Part 3 b. The expected rate of return for stock B is enter your response here %. (Round to two decimal places.) Part 4 The standard deviation for stock B is enter…

Answer 1

Question

Chapter 8, Problem 3P

a)

Summary Introduction

To determine: The riskier stock from the two stocks and reason.

b)

Summary Introduction

To discuss: Whether there is a change in part (a) when there is a change in both beta values.

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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 0.25 13% 0.25 −7% 0.50 14% 0.25 7% 0.25 18% 0.25 16% 0.25 23% (Click on the icon in order to copy its contents into a spreadsheet.) Question content area bottom Part 1 a. Given the information in the table, the expected rate of return for stock A is enter your response here %. (Round to two decimal places.) Part 2 The standard deviation of stock A is enter your response here %. (Round to two decimal places.) Part 3 b. The expected rate of return for stock B is enter your response here %. (Round to two decimal places.) Part 4 The standard deviation for stock B is enter…

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 0.35 13% 0.25 −7% 0.30 17% 0.25 8% 0.35 21% 0.25 15% 0.25 23% (Click on the icon in order to copy its contents into a spreadsheet.) Question content area bottom Part 1 a. Given the information in the table, the expected rate of return for stock A is enter your response here%. (Round to two decimal places.)

The expected rate of return for the stock of Cornhusker Enterprises is 15 percent, with a standard deviation of 5 percent. The expected rate of return for the stock of Mustang Associates is 10 percent, with a standard deviation of 2 percen a. Which stock would you consider to be riskier? Round your answers to two decimal places. The coefficient of variation of returns for Cornhusker's stock: The coefficient of variation of returns for Mustang's stock: ✓is riskier. -Select- b. If you knew that the beta coefficient of Cornhusker stock is 0.9 and the beta of Mustang is 0.6, how would your answer to Part a change? Looking only at systematic risk -Select- ✓is riskier.