Question
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You have the following information about shares A and B: (1) - The purchase price of share (A) is (120) pounds, and the expected selling prices for it, after a year, are (132, 124, 122, 116) pounds with probabilities of (30, 50, 15, 5), respectively, accompanied by cash distributions of (8, 5, 4, 0) pounds, respectively.
(2) - The expected return for stock (B) is (16%), while the standard deviation of its returns is (10%). Required : A - Calculate the holding period return for each price, from the expected prices of stock A. B - Estimate the expected return and standard deviation for stock A. C - Determine which stock is better between the two stocks, from the perspective of return per unit risk.
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