Common Stock A Probability 0.25 0.50 0.25 Return 13% 16% 21% Syntex, Inc. is considering an...

Transcribed Image Text:

Common Stock A Probability 0.25 0.50 0.25 Return 13% 16% 21% 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? Probability 0.10 0.40 0.40 0.10 (Click on the icon in order to copy its contents into a spreadsheet.) Common Stock B Return - 6% 7% 15% 21% ₂ a. Given the information in the table, the expected rate of return for stock Ais %. (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 Bis%. (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.) O A. Stock A is better because it has a higher expected rate of return with less risk. OB. Stock B is better because it has a lower expected rate of return with more risk. Common Stock A Probability 0.25 0.50 0.25 Return 13% 16% 21% 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? Probability 0.10 0.40 0.40 0.10 (Click on the icon in order to copy its contents into a spreadsheet.) Common Stock B Return - 6% 7% 15% 21% ₂ a. Given the information in the table, the expected rate of return for stock Ais %. (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 Bis%. (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.) O A. Stock A is better because it has a higher expected rate of return with less risk. OB. Stock B is better because it has a lower expected rate of return with more risk.

Answer rating: 100% (QA)

a Calculation of the expected rate of return for stock A and the standard deviation of stock A Expec... View the full answer