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You are considering an investment in one of two common stocks. The standard deviation of returns for assets A & B respectively are 1.73% and 5.49%.
Common Stock A Common Stock B
Probability Return Probability Return
.10 15.0% .20 4.0%
.20 11.5% .45 11.0%
.40 10.0% .10 25.0%
.30 9.0% .25 9.0%
1) Find the expected return for both stocks.
2) Based on risk and return, which investment is better? Explain why you made this choice.
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