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Stocks X and Y have the following probability distributions of expected future returns PROBABILITY X% Y% 0.1 (35) 0.2 0.4 20 0.2 25 0.1 38

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Stocks X and Y have the following probability distributions of expected future returns PROBABILITY X% Y% 0.1 (35) 0.2 0.4 20 0.2 25 0.1 38 45 (1) Calculate the expected rate of return for stocks X and Y (6 marks) (ii) Calculate the standard deviation of expected return for stocks X and Y. (14 marks) (iii) Calculate the coefficient of variation for stock X and Y (3 marks) (iv) As a risk-averse investor, which stock would you buy? Give your reason. (2 marks) (10) 2 12 20

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