Q9 (Expected rate of return and risk) Syntex, Inc. is considering an investment in one of two
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Question:
Q9
(Expected rate of return and risk) Syntex, Inc. is considering an investment in one of two common stocks.
Stock A Stock B
Prob Return Prob Return
0.35 12% 0.25 -6%
0.30 17% 0.25 8%
0.35 18% 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 the risk (as measured by the standard deviation) and return of each stock which investment is better? (Round to 2 decimal places)
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