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You have estimated the following probability distributions of expected future returns for Stocks X and Y: (Please show calculations using excel) Stock X Stock Y
You have estimated the following probability distributions of expected future returns for Stocks X and Y: (Please show calculations using excel)
Stock X | Stock Y | ||||||
Probability | Return | Probability | Return | ||||
0.1 | -10 | % | 0.2 | 4 | % | ||
0.3 | 12 | 0.2 | 6 | ||||
0.3 | 14 | 0.2 | 12 | ||||
0.2 | 30 | 0.2 | 18 | ||||
0.1 | 45 | 0.2 | 30 |
What is the expected rate of return for Stock X? Stock Y? Round your answers to one decimal place.
Stock X
Stock Y
What is the standard deviation of expected returns for Stock X? For Stock Y? Round your answers to two decimal places.
Stock X %
Stock Y %
- Which stock would you consider to be riskier?
_____ is riskier because it has a _____ standard deviation of return
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