The probability distributions of possible returns for Stocks X and Y are as follows: Economic...
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Accounting
The probability distributions of possible returns for Stocks X and Y are as follows:
Economic State Probability X Y
Recession 0.2 -15% -5%
Normal 0.6 20% 15%
Boom 0.2 30% 25%
- Calculate the expected return on each stock. Show your calculations. (8 points)
- Calculate the standard deviation for each stock. Show your calculations. (10Points)
- Which stock do you consider riskier? Explain. (2 Points)
- In which stock would you prefer to invest? Explain. (2 Points)
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