# EXPECTED RETURNS Stocks X and Y have the following probability distributions of expected future returns: Probability X Y 0.1 (10%) (35%) 0.2 2 0 0.4 12 20 0.2 20 2S 0.1 38 45 a. Calculate the expected rate of return, r ^ Y , for Stock Y ( r ^ X = 12%). b. Calculate the standard deviation of expected returns, σ X , for Stock X (σ Y = 20.35%). Now calculate the coefficient of variation for Stock Y. Is it possible that most investors will regard Stock Y as being less risky than Stock X? Explain.

### Fundamentals of Financial Manageme...

14th Edition
Eugene F. Brigham + 1 other
Publisher: Cengage Learning
ISBN: 9781285867977

### Fundamentals of Financial Manageme...

14th Edition
Eugene F. Brigham + 1 other
Publisher: Cengage Learning
ISBN: 9781285867977

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