(Expected rate of return and risk) Syntex, Inc. is considering an investment in one of two common stocks.

Common Stock A:

Probability: Return:

0.35 12%

0.30 17%

0.35 18%

Common Stock B:

Probability: Return:

0.25 -6%

0.25 8%

0.25 13%

0.25 20%

• Given the information in the table, what is the expected rate of return for stock B?
• What is the standard deviation of stock B?
• What is the expected rate of return for Stock A?
• Based on Risk (as measured by the standard deviation) and return of stock which investment is better?