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Really need help with this please and thank you in advance for your help! 2- There are two stocks in the market: a) The common
Really need help with this please and thank you in advance for your help!
2- There are two stocks in the market: a) The common price for the first stock is 200 dollars. Five different states are expected: extreme risk with 10%, high risk with 20%, medium risk for fair) with 30%, low risk with 30%, and safest mode with 10% probabilities. The expected future prices for each state are 300, 260, 225, 180, and 110 dollars, respectively. The expected dividends are 5, 3. 1,-1, and -4 dollars. respectively. Calculate the expected retum and standard deviation over all contingencies (4 points) b) The common price for the second stock is 150 dollars. Five different states are expected extreme risk with 5%, high risk with 10%, medium risk (or fair) with 50%, low risk with 30%, and safest mode with 5% probabilities. The expected future prices for each state are 225, 185, 170, 145, and 90 dollars, respectively. The expected dividends are 3.5.2, 1.5, -0.5, and -2 dollars, respectively. Calculate the expected return and standard deviation over all contingencies (4 points). c) Calculate the stability of those two stocks. Which one should one buy? Explain. (3 points) Step by Step Solution
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