1. Assume you can only buy 1 of the following 2 securities. Which one would you prefer? (Hint: calculate the Expected Return, the Standard Deviation and the Coefficient of Variance. You will want to own the stock that has less risk per unit of expected return).

Asset X Asset Y

Prob. Outcome Prob. Outcome

.1 -3% .05 -3%

.1 2 .1 2

.25 5 .3 5

.25 8 .3 8

.3 10 .25 10

>Expected Returns:

Asset X:

Asset Y:

>Standard Deviations:

Asset X:

Asset Y:

>Coefficients of Variation:

Asset X:

Asset Y:

So, if you had to make a choice, which stock would you pick? Why?

Asset X OR Asset Y?

Why: