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a. Compute the expected return for stock X and for stock Y. The expected return for stock X is $ (Type an integer or a
a. Compute the expected return for stock X and for stock Y. The expected return for stock X is $ (Type an integer or a decimal. Do not round.) The expected return for stock Y is $ (Type an integer or a decimal. Do not round.) b. Compute the standard deviation for stock X and for stock Y. The standard deviation for stock X is $ (Round to two decimal places as needed.) The standard deviation for stock Y is $ (Round to two decimal places as needed.) c. Would you invest in stock X or stock Y ? Explain. Choose the correct answer below. A. Based on the expected value, stock X should be chosen. However, stock X has a larger standard deviation, resulting in a higher risk, which should be taken into consideration. B. Since the expected values are approximately the same, either stock can be invested in. However, stock X has a larger standard deviation, which results in a higher risk. Due to the higher risk of stock X, stock Y should be invested in. C. Based on the expected value, stock Y should be chosen. However, stock Y has a larger standard deviation, resulting in a higher risk, which should be taken into consideration. D. Since the expected values are approximately the same, either stock can be invested in. However, stock Y has a larger standard deviation, which results in a higher risk. Due to the higher risk of stock Y, stock X should be invested in. d. The covariance of stock X and Y is (Round to an integer as needed.) 'ou are trying to develop a strategy for investing in two different stocks. The anticipated annual return for $1,000 investment in each stock under four different economic conditions has the probability distribution shown o the right. Complete parts (a) through ( g below. d. The covariance of stock X and Y is (Round to an integer as needed.) e. What does the covariance indicate about the relationship between stock X and Y ? A. As stock X increases in value, stock Y decreases in value. B. As stock X decreases in value, stock Y increases in value. C. There is not enough information to determine an answer. D. As stock X increases in value, stock Y increases in value. f. Suppose 41% is invested in stock X and the rest in stock Y. Then the expected portfolio return is $ with a portfolio risk of $ (Round to two decimal places as needed.) g. Suppose 72% is invested in stock X and the rest in stock Y. Then the expected portfolio return is $ with a portfolio risk of $ (Round to two decimal places as needed.)
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