You are considering the three securities listed below.

Returns
Probability Stock X Stock Y Stock Z
20% 3% -2% 5%

50% 11% 9% 8%
30% 16% 21% 12%

a. Calculate the expected return (mean) for each security.


b. Calculate the standard deviation of returns (risk) for each security.


c. As an investor, compare Stock X with Stock Y, and identify which stock will you
select and why.


d. What is the expected return on your portfolio if you have 30% in Stock X and 70%
in Stock Z?