Stocks A and B have the following probability distributions: RETURNS PROBABILITY STOCK A STOCK B 0.1 33% 6
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Stocks A and B have the following probability distributions: RETURNS PROBABILITY STOCK A STOCK B 0.1 33% 6
Stocks A and B have the following probability distributions:RETURNSPROBABILITY STOCK A STOCK B0.1 33% 60%0.2 20% 30%0.4 15% 5% 0.3 0 - 20%a) Calculate expected return for each stock b) Calculate the expected return of a portfolio consisting of 50% of each stock c) Calculate the standard deviation of returns for each stock and for the portfolio. Which stock is considered riskier with respect to total risk? d) Compute the coefficient of variation for each stock. According to the coefficient of variation, which stock is considered riskier? e) Calculate the coefficient of variation for the portfolio f) If you are a risk-averse investor, would you prefer to hold stock A, stock B or the portfolio? Why?