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Investors have made the following forecast about the returns from investing in securities issued by two companies: Probability of Rate of Rate of State of
Investors have made the following forecast about the returns from investing in securities issued by two companies: Probability of Rate of Rate of State of the this state of the return from return from Economy Boom economy Company X Company Z 5% 19% 51% Good times 20% 17% 31% Average times 50% 15% 20% Bad times 15% 6% -6% Recession 10% 1% -27% Required: A. Calculate the expected return of each distribution. B. Calculate the standard deviation of each distribution. C. In terms of total risk, which security is safer? Your answers to this open-ended assignment should be placed in the space below this line. A Company X Probability Return Product B Expected return Company Z Probability Return Product Expected return Calculations of Standard Deviation Company X Deviation Probability Return Deviation Squared Product Variance Standard deviation C Company Z Deviation Probability Return Deviation Squared Product Variance Standard deviation
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