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2) You are considering the three securities listed below Returns Stock A 2% 10% 15% Probability 20% Stock B -3% Stock C 5% 8%

a. Calculate the expected return for each security.

b. Calculate the standard deviation of returns for each security.

c. Compare Stock A with Stocks B and C. Is Stock A preferred over the others?

d. Using your result in parts a and b, compute the following probabilities:

 Stock A makes a return more than 18.9%

 Stock B makes a return less than 1.3%

 Stock C makes a return between 6.1% and 16.1%

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Answer #1

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