Stocks A and B have the following probability distributions ofexpected future returns:

Probability	A	B
0.2	(12%)	(36%)
0.3	6	0
0.2	14	24
0.1	22	28
0.2	31	36

1. Calculate the expected rate of return, , for Stock B ( =10.60%.) Do not round intermediate calculations. Round your answerto two decimal places.
     %

2. Calculate the standard deviation of expected returns,?_A, for Stock A (?_B = 25.58%.) Do not roundintermediate calculations. Round your answer to two decimalplaces.
     %

   Now calculate the coefficient of variation for Stock B. Roundyour answer to two decimal places.

   Is it possible that most investors might regard Stock B as beingless risky than Stock A?

   1. If Stock B is more highly correlated with the market than A,then it might have a lower beta than Stock A, and hence be lessrisky in a portfolio sense.
   2. If Stock B is more highly correlated with the market than A,then it might have the same beta as Stock A, and hence be just asrisky in a portfolio sense.
   3. If Stock B is less highly correlated with the market than A,then it might have a lower beta than Stock A, and hence be lessrisky in a portfolio sense.
   4. If Stock B is less highly correlated with the market than A,then it might have a higher beta than Stock A, and hence be morerisky in a portfolio sense.
   5. If Stock B is more highly correlated with the market than A,then it might have a higher beta than Stock A, and hence be lessrisky in a portfolio sense.
   
   
   -Select-IIIIIIIVVItem 4

3. Assume the risk-free rate is 2.5%. What are the Sharpe ratiosfor Stocks A and B? Do not round intermediate calculations. Roundyour answers to two decimal places.

   Stock A:

   Stock B:

   Are these calculations consistent with the information obtainedfrom the coefficient of variation calculations in Part b?

   1. In a stand-alone risk sense A is more risky than B. If Stock Bis less highly correlated with the market than A, then it mighthave a lower beta than Stock A, and hence be less risky in aportfolio sense.
   2. In a stand-alone risk sense A is more risky than B. If Stock Bis less highly correlated with the market than A, then it mighthave a higher beta than Stock A, and hence be more risky in aportfolio sense.
   3. In a stand-alone risk sense A is less risky than B. If Stock Bis more highly correlated with the market than A, then it mighthave the same beta as Stock A, and hence be just as risky in aportfolio sense.
   4. In a stand-alone risk sense A is less risky than B. If Stock Bis less highly correlated with the market than A, then it mighthave a lower beta than Stock A, and hence be less risky in aportfolio sense.
   5. In a stand-alone risk sense A is less risky than B. If Stock Bis less highly correlated with the market than A, then it mighthave a higher beta than Stock A, and hence be more risky in aportfolio sense.