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(Expected rate of return and risk ) Summerville Inc. is considering an investment in one of two common stocks. Given the information that follows, which
(Expected rate of return and risk ) Summerville 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 of each?
Common Stock A | Probability | Return |
0.20 | 12% | |
0.60 | 15% | |
0.20 | 20% |
Common Stock B | Probability | Retuen |
0.10 | -5% | |
0.40 | 5% | |
0.40 | 14% | |
0.10 | 21% |
a. Summerville Inc. is considering an investment in one of two common stocks. Given the information in the table, what is the expected rate of return for Stock A? (Round to two decimal places)
b. What is expected rate of return for Stock B?
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