Question content area top

Part 1

(Expected rate of return and risk) Syntex, Inc. is considering an investment in one of two common stocks. Given the information thatfollows, which investment is better, based on the risk (as measured by the standard deviation) and return?

Common Stock A		Common Stock B
Probability	Return	Probability	Return
0.25	12%	0.15	7%
0.50	14%	0.35	7%
0.25	20%	0.35	15%
		0.15	20%

(Click

on the icon

in order to copy its contents into a

spreadsheet.)

Question content area bottom

Part 1

a.Given the information in the table, the expected rate of return for stock A is

enter your response here%.

(Round to two decimal places.)

Part 2

The standard deviation of stock A is

enter your response here%.

(Round to two decimalplaces.)

Part 3

b.The expected rate of return for stock B is

enter your response here%.

(Round to two decimal places.)

Part 4

The standard deviation for stock B is

enter your response here%.

(Round to two decimalplaces.)

Part 5

c.Based on the risk (as measured by the standard deviation) and return of each stock, which investment is better?(Select the best choice below.)

A.

Stock A is better because it has a higher expected rate of return with less risk.

B.

Stock B is better because it has a lower expected rate of return with more risk.