(Expected rate of return and risk) Summerville Inc. is considering an investment in one of two common stocks. Given the information that follows, which investment is better, based on the risk (as measured by the standard deviation) and return of each?
COMMON STOCK A COMMON STOCK B
PROBABILITY RETURN PROBABILY RETURN
.30 11% .20 -5%
.40 15% .30 6%
.30 19% .30 14%
.20 22%
PROBABILITY RETURN PROBABILY RETURN
.30 11% .20 -5%
.40 15% .30 6%
.30 19% .30 14%
.20 22%
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