Questions: a. Compute the expected return for stock X and for stock Y b. Compute the standard deviation for stock X and for stock Y. c. Determine the best course to take for investing.
Questions: a. Compute the expected return for stock X and for stock Y b. Compute the standard deviation for stock X and for stock Y. c. Determine the best course to take for investing.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Questions:
a. Compute the expected return for stock X and for stock Y
b. Compute the standard deviation for stock X and for stock Y.
c. Determine the best course to take for investing.
Transcribed Image Text:You are trying to develop a strategy for investing in two
different stocks. The anticipated annual return for a $1,000
investment in each stock under four different economic
conditions has the probability distribution shown to the right.
Complete parts (a) through (c) below.
Economic
Probability Condition
0.1
Recession
0.2
0.4
0.3
Slow growth
Moderate growth
Fast growth
Returns
Stock X Stock Y
- 100
- 60
40
20
130
110
200
150
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