Reference no: EM132559153
Question 1. Your rate of return expectations for the common stock of XYZ Company during the next year are:
Possible Rate of Return Probability
-0.10 0.25
0.00 0.15
0.10 0.35
0.25 0.25
i. Compute the expected return [E(Ri)] on this investment, the variance of this return (σ2), and its standard deviation (σ).
Question 2. Your rate of return expectations for the stock of KLM Company during the next year are:
Possible Rate of Return Probability
-0.60 0.15
-0.30 0.10
- 0.10 0.05
0.20 0.40
0.40 0.20
0.80 0.10
i. Compute the expected return [E(Ri)] on this stock, the variance (σ2) of this return, and its standard deviation (σ).
ii. On the basis of expected return [E(Ri)] alone, discuss whether XYZ or KLM is preferable.\
iii. On the basis of standard deviation (σ) alone, discuss whether XYZ or KLM is preferable.()1. Your rate of return expectations for the common stock of XYZ Company during the next year are:
Possible Rate of Return Probability
-0.10 0.25
0.00 0.15
0.10 0.35
0.25 0.25
i. Compute the expected return [E(Ri)] on this investment, the variance of this return (σ2), and its standard deviation (σ).
2. Your rate of return expectations for the stock of KLM Company during the next year are:
Possible Rate of Return Probability
-0.60 0.15
-0.30 0.10
- 0.10 0.05
0.20 0.40
0.40 0.20
0.80 0.10
i. Compute the expected return [E(Ri)] on this stock, the variance (σ2) of this return, and its standard deviation (σ).
ii. On the basis of expected return [E(Ri)] alone, discuss whether XYZ or KLM is preferable.\
iii. On the basis of standard deviation (σ) alone, discuss whether XYZ or KLM is preferable.()