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Q7. Your rate of return expectations for Stock A and Stock B during the next year are: STOCK A Possible Rate of Return -0.10 0.00

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Q7. Your rate of return expectations for Stock A and Stock B during the next year are: STOCK A Possible Rate of Return -0.10 0.00 0.10 0.25 Probability 0.25 0.15 0.35 0.25 STOCKB Possible Rate of Return -0.60 -0.30 -0.10 0.20 0.40 0.80 Probability 0.15 0.10 0.05 0.40 0.20 0.10 1 3 (a) Compute the expected return [E(Ri)] on this investment, the variance of this return (62), and its standard deviation (6). (b) Under what conditions can the standard deviation be used to measure the relative risk of two investments? (c) Under what conditions must the coefficient of variation be used to measure the relative risk of two investments

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