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You have estimated the following probability distributions

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You have estimated the following probability distributions of expected future returns for Stocks X and Y:

Stock X                                   Stock Y

Probability       Return                         Probability       Return

.1                     -10%                            .2                     2%

.2                     10                                .2                     7

.4                     15                                .3                     12

.2                     20                                .2                     15

.1                     40                                .1                     16

a. What is the expected rate of return for Stock X? Stock Y?

b. What is the standard deviation of expected returns for Stock X? For Stock Y?

c. Which stock would you consider to be riskier? Why?

 

Reference no: EM13268607

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