What is the standard deviation of the returns on the Fly-by-Night Airlines stock and Feet-on-the-Ground Bus Company,
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What is the standard deviation of the returns on the Fly-by-Night Airlines stock and Feet-on-the-Ground Bus Company, with the same return outcomes and probabilities described above? Of these two stocks, which is riskier?
Suppose that Fly-by-Night stock has a return of 15% half of the time and 5% the other half of the time, making its expected return 10%, while stock in Feet-on-the-Ground has a fixed return of 10%.
The fly-by-Night stock has an uncertainty associated with its returns and so has a greater risk than stock in Feet-on-the ground, whose return is a sure thing.
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