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You are trying to develop a strategy for investing in two different stocks. The anticipated annual return for a $1,000 investment in each stock under

You are trying to develop a strategy for investing in two different stocks. The anticipated annual return for a $1,000 investment in each stock under four different economic conditions has the following probability distribution.

Returns
Probability Economic Condition Stock X Stock Y
0.1 Recession -50 -100
0.2 Slow Growth 20 50
0.45 Moderate Growth 100 130
0.25 Fast Growth 150 200

Compute the:

  1. Expected Return for Stock X and Stock Y.
  2. Standard Deviation for Stock X and Stock Y
  3. Would you invest in Stock X or Stock Y? Explain.

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