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You are interested in investing in two different shares. The anticipated annual return for a $1,000 investment...

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Question

Statistics

You are interested ininvesting in two different shares. The anticipated annual returnfor a $1,000 investment in each share under different economicconditions is given below, together with the probability that eachof these economic conditions will occur.

Stateof

Returns

Probability

theeconomy

ShareX

ShareY

0.25

Recession

$240

-$100

0.5

Slow growth

$150

$150

0.25

High growth

-$100

$240

  1. Calculate the expected return for share X and for share Y.
  1. Calculate the standard deviation for share X and for shareY.
  1. Would you invest $1000 in share X or share Y or are they bothequally desirable? Give a broad explanation of your answer.

Answer & Explanation Solved by verified expert
3.6 Ratings (484 Votes)
Solution a The expected return for share X is given as follows The expected return for share X is 110The expected return for share Y is given as follows The    See Answer
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