Consider the following two companies and their forecasted returns for the upcoming year:

Company A

Company B

Outcome 1

Probability

100%

25%

Return

5%

7.5%

Outcome 2

Probability

-

25%

Return

-

2.5%

Questions:

1- What is the standard deviation of the returns on each company's stock (Company A, and B) (write all formulas) (5 Marks).

2- Of these two stocks, which is riskier? Explain why. (2 marks).

Company A

Company B

Re

12.3567 9 10 11 12 13 14 15 10 Question 1 (L05) (7 marks) Consider the following two companies and their forecasted retums for the upcoming year. Company A Company B Outcome 1 Probability 100% 25% Retum 5% 7.5% Outcome 2 Probability 25% Return 2.5% Questions: 1- What is the standard deviation of the returns on each company's stock Company A, and B) (write all formulas)