Siti Aisyah is considering investing in one of the following stocks. The relevant information about the stocks are as follows: b) Siti Aishah is considering investing in one of the following stocks. The relevant informatic about the stocks are as follows: State of the economy Probability of the state Investment return Kekanda Bhd. Adinda Bhd. Bear 0.35 -30% 12% Normal 0.45 18% 18% Bull 0.20 90% 24% 1.00 Based on the information given, answer the follow following questions a) Calculate the expected rate of return for Kekanda and Adinda b) Calculate the standard deviation of return for Kekanda and Adinda c) If Alpha is a risk averse type investor, which stock should she choose and state your reason.

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
Question
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Siti Aisyah is considering investing in one of the following stocks. The relevant information about the stocks are as follows:
b) Siti Aishah is considering investing in one of the following stocks. The relevant informatic about the stocks are as follows:
State of the economy
Probability of the state
Investment return
Kekanda Bhd.
Adinda Bhd.
Bear
0.35
-30%
12%
Normal
0.45
18%
18%
Bull
0.20
90%
24%
1.00
Based on the information given, answer the follow following questions
a) Calculate the expected rate of return for Kekanda and Adinda
b) Calculate the standard deviation of return for Kekanda and Adinda
c) If Alpha is a risk averse type investor, which stock should she choose and state your reason.
Transcribed Image Text:Siti Aisyah is considering investing in one of the following stocks. The relevant information about the stocks are as follows: b) Siti Aishah is considering investing in one of the following stocks. The relevant informatic about the stocks are as follows: State of the economy Probability of the state Investment return Kekanda Bhd. Adinda Bhd. Bear 0.35 -30% 12% Normal 0.45 18% 18% Bull 0.20 90% 24% 1.00 Based on the information given, answer the follow following questions a) Calculate the expected rate of return for Kekanda and Adinda b) Calculate the standard deviation of return for Kekanda and Adinda c) If Alpha is a risk averse type investor, which stock should she choose and state your reason.
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