You are a portfolio manager. John Smith, one of your clients, by providing you the following formation requested you to calculate standard deviation of Shah Corporation stock and High Fly Corporation. Based on the given information, what is the standard deviation of the returns on i) Shah Corporation and ii) High Fly Corporation? Which stock has higher standard deviation? Why? Please provide your reasoning. Please show all the calculations by which you came up with the final answer.
You are a portfolio manager. John Smith, one of your clients, by providing you the following formation requested you to calculate standard deviation of Shah Corporation stock and High Fly Corporation. Based on the given information, what is the standard deviation of the returns on i) Shah Corporation and ii) High Fly Corporation? Which stock has higher standard deviation? Why? Please provide your reasoning. Please show all the calculations by which you came up with the final answer.
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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Based on the given information, what is the standard deviation of the returns on i) Shah Corporation and ii) High Fly Corporation? Which stock has higher standard deviation? Why? Please provide your reasoning. Please show all the calculations by which you came up with the final answer.
Transcribed Image Text:Shah Corporation Stock
State of Economy Probability of State of Economy Rate of Return if State Occurs
Вoom
5%
31%
Good
25%
21%
Рor
50%
-8%
Bust
20%
-10%
High Fly Corporation Stock
State of Economy Probability of State of Economy Rate of Return if State Occurs
Вoom
5%
25%
Good
25%
18%
Рor
50%
-5%
Bust
20%
-11%
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