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 Common Stock B Probability Return Probability Return 0.20 10% 0.15 -4% 0.60 16% 0.35 7% 0.20 21% 0.35 13% 0.15 20% a) Syntex, Inc. is considering an investment in one of two common stocks. Given the information that follows, what is the expected rate of return for stock A? What is the standard deviation? b. Syntex, Inc. is considering an investment in one of two common stocks. Given the information that follows, what is the expected rate of return for stock B? What is the standard deviation? c. Based on the risk (as measured by the standard deviation) and return of each stock, which investment is better?
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 Common Stock B Probability Return Probability Return 0.20 10% 0.15 -4% 0.60 16% 0.35 7% 0.20 21% 0.35 13% 0.15 20% a) Syntex, Inc. is considering an investment in one of two common stocks. Given the information that follows, what is the expected rate of return for stock A? What is the standard deviation? b. Syntex, Inc. is considering an investment in one of two common stocks. Given the information that follows, what is the expected rate of return for stock B? What is the standard deviation? c. Based on the risk (as measured by the standard deviation) and return of each stock, which investment is better?
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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Question
(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 Common Stock B
Probability Return Probability Return
0.20 10% 0.15 -4%
Probability Return Probability Return
0.20 10% 0.15 -4%
0.60 16% 0.35 7%
0.20 21% 0.35 13%
0.15 20%
0.20 21% 0.35 13%
0.15 20%
a) Syntex, Inc. is considering an investment in one of two common stocks. Given the information that follows, what is the expected rate of return for stock A? What is the standard deviation?
b. Syntex, Inc. is considering an investment in one of two common stocks. Given the information that follows, what is the expected rate of return for stock B? What is the standard deviation?
c. Based on the risk (as measured by the standard deviation) and return of each stock, which investment is better?
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