Stock A and B have the following probability distributions of returns-

a) Calculate the expected returns for each stock.

b) Calculate the standard deviation for each stock.

c) If you create a portfolio that contains 40% of stock A and 60% of stock B, what will be the expected return of the portfolio?

d) According to your calculation which stock has a higher risk? Why should investor choose that?

Probability 0.5 0.2 0.3 Return of stock A -3.5% 10% 15% Return of stock B 22% 12% 3%