You have inherited some funds and decided to invest in one of two international companies – Coca Cola and Walmart. You research revealed and found the following possible performance of the investments. You have estimated the following probability distributions of expected future returns for Coca Cola and Walmart. Coca Cola Walmart Probability Return Probability Return 0.1 –10% 0.2 2% 0.2 10 0.2 7 0.4 15 0.3 12 0.2 20 0.2 15 0.1 40 0.1 16 (ai) What is the expected rate of return for Coca Cola andWalmart? (aii) What is the standard deviation of expected returns for Stock X and for stock Y? (aiii) Which stock is riskier and why?
You have inherited some funds and decided to invest in one of two international companies – Coca Cola and Walmart. You research revealed and found the following possible performance of the investments.
- You have estimated the following probability distributions of expected future returns for Coca Cola and Walmart.
Coca Cola Walmart
Probability Return Probability Return
0.1 –10% 0.2 2%
0.2 10 0.2 7
0.4 15 0.3 12
0.2 20 0.2 15
0.1 40 0.1 16
(
(aii) What is the standard deviation of expected returns for Stock X and for stock Y?
(aiii) Which stock is riskier and why?
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