Course: MGMT3050 Investment & Analysis

Please answer all parts

Question 4 (12 marks) a) Describe with examples, the difference between market risk and event risk (6 marks) b) Consider the probability distribution for the returns on stocks A and B provided below: Return on Return on State Probability Stock A Stock B 1 20% 5% 50% 2 30% 10% 3 30% 15% 10% 3 20% 20% -10% 30% Which stock is more risky? Support your answer by computing the standard deviations of their returns. (6 marks)