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The table below shows the performance of two shares x and y under four different economic conditions and their associated probabilities of occurrence Economic condition
The table below shows the performance of two shares x and y under four different economic conditions and their associated probabilities of occurrence
Economic condition | Rate of return (%)
| Probabilities | ||
Growth Expansion Stagnation Recession
| x | y | X | y |
18.50 12.75 1.25 -6.00 |
16.50 14.00 1.80 -4.50 |
0.25 0.25 0.25 0.25 |
0.20 0.45 0.20 0.15 |
Required;
- The expected rate of return for shares x and y. (4 Marks)
- The standard deviation of returns for shares x and y. (4 Marks)
- The coefficient of variation of returns for shares x and y. (4 Marks)
- Advice an investor on the preferred share. (2 Marks)
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