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Problem $8-07$

You are considering two stocks and have determined the following information:

Stock A Return Probability of the Return

$26\%45\%$

$1120$

$535$

Stock B Return Probability of the Return

$21\%25\%$

$1855$

$820$

Which of the two stocks has the higher expected return? Round your answers to two decimal places.

The return on Stock A:

$\%$

The return on Stock B:

$\%$

$-$Select$-$

has the higher expected return.

Which stock is riskier? Do not round intermediate calculations. Round your answers to two decimal places.

Standard deviation of Stock A:

Standard deviation of Stock B:

$-$Select$-$

is riskier.

Given your answers to the two previous questions, what stock is preferred?

$-$Select$-$

is preferred.