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

Probability Return 0.15 -3% 0.30 2% 0.40 4% 0.15 6%

(Expected rate of return and risk) Syntex, Inc. is considering an investment in one of two common stocks. Given the information that follows, 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 13% 0.10 -4% 0.50 14% 0.40 8% 0.25 21% 0.40 13% 0.10 23%

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

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