EXPECTED RETURNS: Stock's X and Y have the following probability distributions of expected future returns:

probability X Y

.1 (10%) (35%)

.2 2 0

.4 12 20

.2 20 25

.1 38 45

a.) Calculate the expected rate of return, r^y for stock Y ( r^x= 12%)

b.) Calculate the standard deviation of expected returns, Qx, for stock X (Qy= 20.35%) Now calculate the coefficient of variation for stock Y. Is it possible that most investors will regard stock Y as being less risky than stock X?