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Suppose the risk-free interest rate is 5%, and the stock market will return either 40% or 20% each year, with each outcome equally likely. Compare
Suppose the risk-free interest rate is 5%, and the stock market will return either 40% or 20% each year, with each outcome equally likely. Compare the following two investment strategies: (1) invest for one year in the risk-free investment, and one year in the market, or (2) invest for both years in the market. ASSUME $1 IS INVESTED.
Please calculate the Pure Expected return and Standard Deviation for each scenario.
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