Stocks K and M have the following probability distributions of expected future returns:
Probability J M
0.1 -10% -15%
0.25 4 0
0.3 12 10
0.25 20 15
0.1 16 25
A – Calculate the expected rate of return, k, for Stocks J & M, respectively.
B – Calculate the risk, σ, for Stocks J & M, respectively.