Stocks A and B have the following probability distributions of expected future returns:

Probability A B

0.1 (12%) (28%)

0.2 3 0

0.4 10 24

0.2 19 28

0.1 31 50

Calculate the expected rate of return, rB, for Stock B (rA = 10.30%.) Do not round intermediate calculations. Round your answer to two decimal places.

% Calculate the standard deviation of expected returns, A, for Stock A (B = 20.32%.) Do not round intermediate calculations. Round your answer to two decimal places. %

Now calculate the coefficient of variation for Stock B. Round your answer to two decimal places.

Is it possible that most investors might regard Stock B as being less risky than Stock A?

which is correct....

If Stock B is less highly correlated with the market than A, then it might have a lower beta than Stock A, and hence be less risky in a portfolio sense.

If Stock B is less highly correlated with the market than A, then it might have a higher beta than Stock A, and hence be more risky in a portfolio sense.

If Stock B is more highly correlated with the market than A, then it might have a higher beta than Stock A, and hence be less risky in a portfolio sense.

If Stock B is more highly correlated with the market than A, then it might have a lower beta than Stock A, and hence be less risky in a portfolio sense.

If Stock B is more highly correlated with the market than A, then it might have the same beta as Stock A, and hence be just as risky in a portfolio sense.