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Stocks P and Q have the following probability distributions of expected future returns: Probabilit y P Q 0.2 -10% -35% 0.2 2 0 0.3
Stocks P and Q have the following probability distributions of expected future returns: Probabilit y P Q 0.2 -10% -35% 0.2 2 0 0.3 12 20 0.2 20 25 0.1 38 45 a) Calculate the expected rate of return for stock Q (5 marks) b) Calculate the standard deviation for stock P. Expected return for P is given 13.4% (5 marks) c) Assume "P" has the expected return of 10% and risk of 20% where as "Q" has the expected return of 7% and risk of 17% which stock will you choose (Show the calculation)? (5 marks)
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