Related to Checkpoint 7.1)

(Expected

rate of return and

risk)

B. J. Gautney Enterprises is evaluating a security. One-year Treasury bills are currently paying

5.2

percent. Calculate the investment's expected return and its standard deviation. Should Gautney invest in this security?

Probability Return

0.10 -6%

0.45 4%

0.35 7%

0.10 8%

a.The investment's expected return is

enter your response here%.

(Round to two decimal places.)

Part 2

b. The investment's standard deviation is

enter your response here%.

(Round to two decimal places.)

Part 3

c.Should Gautney invest in this security?(Select the best choice below.)

A.

Yes. B. J. Gautney Enterprises should invest in this investment because the return is lower than the Treasury bill and the level of risk higher than the Treasury bill.

B.

No. B. J. Gautney Enterprises should not invest in this investment because the return is lower than the Treasury bill and the level of risk higher than the Treasury bill.