The expected returns for David’s portfolio were calculated based on three possible conditions in the market. Such conditions will vary from time to time, and for each condition there will be a specific outcome. These probabilities and outcomes can be represented in the form of a continuous probability distribution graph. For example, the continuous probability distributions of rates of return on stocks for two different companies are shown on the following graph: Based on the graph’s information, which of the following statements is true? A. Company A has a smaller standard deviation. B. Company B has a smaller standard deviation.
The expected returns for David’s portfolio were calculated based on three possible conditions in the market. Such conditions will vary from time to time, and for each condition there will be a specific outcome. These probabilities and outcomes can be represented in the form of a continuous probability distribution graph. For example, the continuous probability distributions of rates of return on stocks for two different companies are shown on the following graph: Based on the graph’s information, which of the following statements is true? A. Company A has a smaller standard deviation. B. Company B has a smaller standard deviation.
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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2. The expected returns for David’s portfolio were calculated based on three possible conditions in the market. Such conditions will vary from time to time, and for each condition there will be a specific outcome. These probabilities and outcomes can be represented in the form of a continuous probability distribution graph.
For example, the continuous probability distributions of rates of return on stocks for two different companies are shown on the following graph:
Based on the graph’s information, which of the following statements is true?
A. Company A has a smaller standard deviation.
B. Company B has a smaller standard deviation.
Transcribed Image Text:PROBABILITY DENSITY
Company A
Company B
-40
-20
20
40
60
RATE OF RETURN (Percent)
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