Question
Du-Point asset management company intends to invest in two stocks with the following risk and return trade off; Probability Stock A Stock B 0.1 33%
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Du-Point asset management company intends to invest in two stocks with the following risk and return trade off;
Probability Stock A Stock B
0.1 33% 60%
0.2 20% 30%
0.4 15% 5%
0.3 0% -20%
Required
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Calculate the expected return of each stock (3 Marks)
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Calculate the risk of each stock ( 4 Marks)
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Calculate coefficient of variation of each stock ( 2 Marks)
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Calculate the expected return of the portfolio consisting of 50% of each stock
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If you are risk averse investor which stock would you prefer to hold and why
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Distinguish between systematic risk and un-systematic risk giving three examples in each case
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