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Two assets, F and G are currently being considered by Perth Industries. The probability distributions of expected returns for the assets are shown in the following table: Asset F Asset G Probability 0.2 Return -5% Probability 0.4 Return 35%

Two assets, F and G are currently being considered by Perth Industries. The probability distributions of expected returns for the assets are shown in the following table: Asset F Asset G Probability 0.2 Return -5% Probability 0.4 Return 35%

Essentials Of Investments
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
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Question 1 Two assets, F and G are currently being considered by Perth Industries. The probability distributions of expected returns for the assets are shown in the following table: Asset F Asset G Probability 0.2 0.4 0.4 Return -5% 10% 15% Probability 0.4 0.3 0.3 Return 35% 10% -10% a) Calculate the expected return for each of the two assets. b) Calculate the standard deviation for each of the two assets. Which appears to have the greatest risk? c) Calculate the coefficient of variation for each of the two assets. If you are an investor, which asset would you prefer? Why?
Transcribed Image Text:Question 1 Two assets, F and G are currently being considered by Perth Industries. The probability distributions of expected returns for the assets are shown in the following table: Asset F Asset G Probability 0.2 0.4 0.4 Return -5% 10% 15% Probability 0.4 0.3 0.3 Return 35% 10% -10% a) Calculate the expected return for each of the two assets. b) Calculate the standard deviation for each of the two assets. Which appears to have the greatest risk? c) Calculate the coefficient of variation for each of the two assets. If you are an investor, which asset would you prefer? Why?
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