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a) The table below shows the performance of two shares A and B under four different economic conditions and their associated probabilities of occurrence: Economic Probabilities Rate of return Rate of return Probabilities Condition % % A B A B Growth 18.50 16.50 0.25 0.45 Expansion 12.75 14.00 0.25 0.20 Stagnation 1.25 1.80 0.25 0.20 Recession -6.00 -4.50 0.25 0.15 Calculate: 1) The expected rate of return for shares A and B. ii) The standard deviation of the returns for shares A and B. 111) The coefficient of variation of returns for shares A and B. Advise an investor on the preferred share.

a) The table below shows the performance of two shares A and B under four different economic conditions and their associated probabilities of occurrence: Economic Probabilities Rate of return Rate of return Probabilities Condition % % A B A B Growth 18.50 16.50 0.25 0.45 Expansion 12.75 14.00 0.25 0.20 Stagnation 1.25 1.80 0.25 0.20 Recession -6.00 -4.50 0.25 0.15 Calculate: 1) The expected rate of return for shares A and B. ii) The standard deviation of the returns for shares A and B. 111) The coefficient of variation of returns for shares A and B. Advise an investor on the preferred share.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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a) The table below shows the performance of two shares A and B under four different economic conditions and their associated probabilities of occurrence: Economic Probabilities Rate of return Rate of return Probabilities Condition % % A B A B Growth 18.50 16.50 0.25 0.45 Expansion 12.75 14.00 0.25 0.20 Stagnation 1.25 1.80 0.25 0.20 Recession -6.00 -4.50 0.25 0.15 Calculate: 1) The expected rate of return for shares A and B. ii) The standard deviation of the returns for shares A and B. 111) The coefficient of variation of returns for shares A and B. Advise an investor on the preferred share.
Transcribed Image Text:a) The table below shows the performance of two shares A and B under four different economic conditions and their associated probabilities of occurrence: Economic Probabilities Rate of return Rate of return Probabilities Condition % % A B A B Growth 18.50 16.50 0.25 0.45 Expansion 12.75 14.00 0.25 0.20 Stagnation 1.25 1.80 0.25 0.20 Recession -6.00 -4.50 0.25 0.15 Calculate: 1) The expected rate of return for shares A and B. ii) The standard deviation of the returns for shares A and B. 111) The coefficient of variation of returns for shares A and B. Advise an investor on the preferred share.
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