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(Computing the expected rate of return and risk) After a tumultuous period in the stock market, Logan Morgan is considering an investment in one of two portfolios. Given the information that follows, which investment is better, based on risk (as measured by the standard deviation) and return

as measured by the expected rate of return?

Portfolio A

Portfolio B

Probability

0.18

0.50

0.32

Return

- 3%

17%

23%

Probability

0.12

0.25

0.42

0.21

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Return

3%

9%

11%

15%

The expected rate of return for portfolio A is %. (Round to two decimal places.)

The standard deviation of portfolio A is_%. (Round to two decimal places.)

b. The expected rate of return for portfolio B is_%. (Round to two decimal places.)

The standard deviation for portfolio B is %. (Round to two decimal places.)

Based on the risk (as measured by the standard deviation) and return as measured by the expected rate of return of each stock, which investment is better? (Select the bext choice below.)

O A

Portfolio A is better because

it has a higher expected rate of return with more risk.

O B.

Portfolio B is better because it has a lower expected rate of return with less risk.

O C.

Based on risk alone, portfolio B is better because it has lower risk; and based on return alone, portfolio A is better because it has a higher return.

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