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Suppose the IBM and Apple have experienced the following stock returns in the last 4 years YEAR IBM % Apple % 2017 0.15 0.05 2018
Suppose the IBM and Apple have experienced the following stock returns in the last 4 years YEAR IBM % Apple % 2017 0.15 0.05 2018 0.6 0.09 2019 0.25 -0.14 2020 -0.25 0.2 Required: A. What are the stocks' average returns, the variances, & the standard deviations? Discuss which investment was more volatile by giving reasons? (3.5 Marks) B. For the coming years we have the below information, and if the probability of the state of economy of the recession is estimated by 50%, what are the Expected Return, Variance, and Standard Deviation of these 2 stocks? If the risk-free rate is 6%, discuss investors prefer which company and why. (3.5 Marks) IBM % Apple % State of Economy (SE) Recession - 16 24 Boom 56 8 C. If an investor equally invests in these 2 stocks, what are the portfolio Expected Return, Variance, and Standard Deviation? (3 Marks) D. Discuss the principle of diversification and why investors diversifies their insnetmente un different seente 12 Marvel
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