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8-6 EXPECTED RETURNS Stocks A and B have the following probability distributions of expected future returns: Probability 0.1 0.2 0.4 0.2 0.1 (10%) (35%) 12
8-6 EXPECTED RETURNS Stocks A and B have the following probability distributions of expected future returns: Probability 0.1 0.2 0.4 0.2 0.1 (10%) (35%) 12 20 38 0 20 25 45 a. Calculate the expected rate of return, rBr for Stock B (A-12%). b. Calculate the standard deviation of expected returns, CA, for Stock A (OB-20.35%). Now calculate the coefficient of variation for Stock B. Is it possible that most investors will regard Stock B as being less risky than Stock A? Explain
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