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Consider investing in one of two investments with the following possible outcomes: States (possible outcome) Probability of Occurrence Investment Returns Asset A Investment Returns Asset
Consider investing in one of two investments with the following possible outcomes: States (possible outcome) Probability of Occurrence Investment Returns Asset A Investment Returns Asset B State 1: Economic boom 5% 11% 40% State 2: Economic growth 10% 9% 30% State 3: No growth 35% 5% 13% State 4: Economic decline 30% -4% -15% State 5: Depression 20% -5% -20% Calculate the following for each Investment: 5.1. The expected rate of return. (6 marks) 5.2. The variance and standard deviation of return. (8 marks) 5.3. The coefficient of variation. (2 marks) 5.4. Which asset provides the best investment prospects? Explain in detail.
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