(Expected rate of return and risk) Syntex, Inc. is considering an investment in one of two common stocks. Given the information that follows, which investment is better, based on the risk (as measured by the standard deviation) and return? Common Stock A Probability 0.25 0.50 0.25 Probability 0.25 0.25 0.25 0.25 (Click on the icon in order to copy its contents into a spreadsheet.) Common Stock B Return 10% 17% 21% Return -6% 5% 15% 23% a. Given the information in the table, the expected rate of return for stock A is 16.25 %. (Round to two decimal places.) The standard deviation of stock A is%. (Round to two decimal places.) b. The expected rate of return for stock B is%. (Round to two decimal places.) The standard deviation for stock B is%. (Round to two decimal places.) c. Based on the risk (as measured by the standard deviation) and return of each stock, which investment is better? (Select the best choice below.) OA. Stock A is better because it has a higher expected rate of return with less risk. B. Stock B is better because it has a lower expected rate of return with more risk.
(Expected rate of return and risk) Syntex, Inc. is considering an investment in one of two common stocks. Given the information that follows, which investment is better, based on the risk (as measured by the standard deviation) and return? Common Stock A Probability 0.25 0.50 0.25 Probability 0.25 0.25 0.25 0.25 (Click on the icon in order to copy its contents into a spreadsheet.) Common Stock B Return 10% 17% 21% Return -6% 5% 15% 23% a. Given the information in the table, the expected rate of return for stock A is 16.25 %. (Round to two decimal places.) The standard deviation of stock A is%. (Round to two decimal places.) b. The expected rate of return for stock B is%. (Round to two decimal places.) The standard deviation for stock B is%. (Round to two decimal places.) c. Based on the risk (as measured by the standard deviation) and return of each stock, which investment is better? (Select the best choice below.) OA. Stock A is better because it has a higher expected rate of return with less risk. B. Stock B is better because it has a lower expected rate of return with more risk.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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(Expected rate of return and risk) Syntex, Inc. is considering an investment in one of two common stocks. Given the information that follows, which investment is better, based on the risk (as
measured by the standard deviation) and return?
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(Click on the icon in order to copy its contents into a spreadsheet.)
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a. Given the information in the table, the expected rate of return for stock A is 16.25 %. (Round to two decimal places.)
The standard deviation of stock A is %. (Round to two decimal places.)
b. The expected rate of return for stock B is%. (Round to two decimal places.)
The standard deviation for stock B is%. (Round to two decimal places.)
c. Based on the risk (as measured by the standard deviation) and return of each stock, which investment is better? (Select the best choice below.)
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OA. Stock A is better because it has a higher expected rate of return with less risk
B. Stock B is better because it has a lower expected rate of return with more risk.
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