Answered step by step
Verified Expert Solution
Question
1 Approved Answer
The table below shows the performance of two shares A and B under four different economic conditions and their associated probabilities of occurrence: Economic Condition
The table below shows the performance of two shares A and B under four different economic conditions and their associated probabilities of occurrence:
Economic Condition | Rate of return % | Rate of return % | Probabilities | Probabilities |
| A | B | A | B |
|
|
|
|
|
Growth | 18.50 | 16.50 | 0.25 | 0.45 |
Expansion | 12.75 | 14.00 | 0.25 | 0.20 |
Stagnation | 1.25 | 1.80 | 0.25 | 0.20 |
Recession | -6.00 | -4.50 | 0.25 | 0.15 |
Calculate:
- The expected rate of return for shares A and B. (6mks)
- The standard deviation of the returns for shares A and B. (8mks)
- The coefficient of variation of returns for shares A and B. (4mks)
- Advise an investor on the preferred share. (2mks)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started