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

Probability A B 0.1 (15%) (37%) 0.2 4 0 0.3 12 22 0.2 19 27 0.2 34 37 a. Calculate the expected rate of return, rB, for Stock B (rA = 13.50%.) Do not round intermediate calculations. Round your answer to two decimal places. % b. Calculate the standard deviation of expected returns, A, for Stock A (B = 21.34%.) Do not round intermediate calculations. Round your answer to two decimal places. % c. Now calculate the coefficient of variation for Stock B. Round your answer to two decimal places.

d.

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

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.