STEP: 3 of 3

Now its time for you to practice what youve learned.

Consider the following two probability distributions of expected future returns for stocks A and B:

Probability	Return
	Stock A	Stock B
	(%)	(%)
0.1	-7.5%	-26.25%
0.2	1.5	0
0.4	9	15
0.2	15	18.75
0.1	28.5	33.75

Suppose you know that the expected rate of return for stock A is 9% and would like to calculate the expected return for stock B.

The expected rate of return for stock B is approximately ________ %.

Suppose you know that the standard deviation of expected returns for stock B is 15.2602% and would like to calculate the standard deviation of expected returns for stock A.

Hint: Recall that the expected rate of return for stock A is 9%.

The variance of the expected returns for stock A is approximately __________ while the standard deviation of expected returns for stock A is approximately ________ %.

Using your calculations in the previous parts of the problem, the coefficient of variation of stock B is approximately __________ .

True or False: Investors will always view the stock with a lower coefficient of variation as a safer choice when compared to a stock with a higher coefficient of variation.

True

False