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
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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?
 
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?  
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