EXPECTED RETURNS Stocks X and Y have thefollowing probability distributions of

expected futurereturns:

Probability X Y

0.1 (10%) (35%)

0.2 2 0

0.4 12 20

0.2 20 25

0.1 38 45

a. Calculatethe expected rate of return, ry, for Stock Y (rx = 12%).

b. Calculatethe standard deviation of expected returns, ox, for Stock X (oy =20.35%). Now calculate the coefficient of variation for Stock Y. Is itpossible that most investors will regard Stock Y as being less risky than StockX? Explain.