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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;

  1. The expected rate of return for shares x and y. (4 Marks)
  2. The standard deviation of returns for shares x and y. (4 Marks)
  3. The coefficient of variation of returns for shares x and y. (4 Marks)
  4. Advice an investor on the preferred share. (2 Marks)

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