Question
You are considering purchasing two stocks with the following possible returns and probabilities of occurrence: Investment A Return Probability of Occurrence -5% 20% 15 40
You are considering purchasing two stocks with the following possible returns and probabilities of occurrence:
Investment A | Return | Probability of Occurrence | ||
-5% | 20% | |||
15 | 40 | |||
20 | 30 | |||
30 | 10 |
Investment B | Return | Probability of Occurrence | ||
-5% | 20% | |||
5 | 40 | |||
10 | 30 | |||
23 | 10 |
Compare the expected returns and risk (as measured by the standard deviations) of each investment.
Investments | Expected Returns | Standard Deviations (to three decimal places) |
A | % | % |
B | % | % |
Which investment offers the higher expected return? -Select-The expected returns are the sameA has greater expected return then BB has greater expected return then AItem 5 .
Which investment is riskier? -Select-The risks are the sameA is less riskyB is less riskyItem 6 .
Compare their relative risks by computing the coefficient of variation. Round your answers to three decimal places.
Investments | Coefficient of Variation |
A | |
B |
-Select-The risks per unit of return are the sameA is less risky per unit of returnB is less risky per unit of returnItem 9 .
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