Problem 8-07

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

Stock A	Return	Probability of the Return
	26	%	35	%
	15		60
	5		5

Stock B	Return	Probability of the Return
	32	%	40	%
	15		10
	6		50

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-Stock AStock BItem 3 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-Stock AStock BItem 6 is riskier.

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

-Select-Stock AStock BItem 7 is preferred.