Problem 8-07

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

Stock A Return Probability of the Return 30 % 30 % 14 15 5 55 Stock B Return Probability of the Return 33 % 30 % 12 45 10 25 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: %

Stock A 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:

Stock A is riskier.

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

-Select- is preferred.