Answer: 0.33

## Explanation To calculate the standard deviation of Stock B, we first need to find the variance and then take the square root. **Step 1: Calculate the expected return of Stock B (E[R_B])** From the probability matrix: - P(R_B = 50%) = 40% - P(R_B = 20%) = 30% - P(R_B = -30%) = 30% \[E[R_B] = (0.50 \times 0.40) + (0.20 \times 0.30) + (-0.30 \times 0.30)\] \[E[R_B] = 0.20 + 0.06 - 0.09\] \[E[R_B] = 0.17\] **Step 2: Calculate the variance of Stock B (Var[R_B])** \[Var[R_B] = E[R_B^2] - (E[R_B])^2\] First, calculate E[R_B^2]: \[E[R_B^2] = (0.50^2 \times 0.40) + (0.20^2 \times 0.30) + ((-0.30)^2 \times 0.30)\] \[E[R_B^2] = (0.25 \times 0.40) + (0.04 \times 0.30) + (0.09 \times 0.30)\] \[E[R_B^2] = 0.10 + 0.012 + 0.027\] \[E[R_B^2] = 0.139\] Now calculate variance: \[Var[R_B] = 0.139 - (0.17)^2\] \[Var[R_B] = 0.139 - 0.0289\] \[Var[R_B] = 0.1101\] **Step 3: Calculate standard deviation** \[\sigma_B = \sqrt{0.1101} \approx 0.3318\] This is closest to 0.33, which corresponds to option C.

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