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Ali would like to invest a small portion of his earnings in stocks of one of two firms. His estimated returns and the probabilities of
Ali would like to invest a small portion of his earnings in stocks of one of two firms. His estimated returns and the probabilities of their occurrence follow:
1-Calculate the expected return for each stock.
2- Measure the risk for each stock with the most appropriate measurement.
3-Rank the two from the least risky to the riskiest.
4-If Ali risk-averse, discuss how he would tend to choose his investments?
\begin{tabular}{|l|l|l|l|} \hline \multicolumn{2}{|l|}{ ABC Company } & \multicolumn{2}{l|}{ XYZ Company } \\ \hline 0.2 & 1500 & 0.1 & 5900 \\ \hline 0.3 & 2500 & 0.4 & 0 \\ \hline 0.3 & 3600 & 0.3 & 1200 \\ \hline 0.2 & 1200 & 0.2 & 2500 \\ \hline \end{tabular}Step by Step Solution
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