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:

Compute the
a. Expected return for stock X and for stock Y.
b. Standard deviation for stock X and for stock Y.
c. Would you invest in stock X or stock Y? Explain.

Transcribed Image Text:

Retums Probability Economic Condition Stock Stock Y - 100 50 130 200 0.1 0.3 0.4 0.2 Recession Slow growth Moderate growth Fast growth -50 20 100 150