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Stocks X and Y have the following probability distributions of expected future returns: Probability X Y 0.1 0.2 (10%) 2 12 (35%) 0 0.4 20
Stocks X and Y have the following probability distributions of expected future returns: Probability X Y 0.1 0.2 (10%) 2 12 (35%) 0 0.4 20 0.2 20 25 0.1 38 45 a. Calculate the expected rate of return of Stock X and Stock Y. b. Calculate the standard deviation of expected returns for Stock X and Stock Y. c. Calculate the coefficient of variation of Stock X and Stock Y. d. Make an equal investment portfolio (50-50) of both stocks and calculate portfolio's: i. Expected return ii. Risk (standard deviation) iii. CV e. Is it better to make a portfolio of stock X and stock Y or invest in a single stock (X or Y)? Explain in detail
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