2. RISKS & RETURNS: A close family friend has approached you to help her determine which of the two common stocks she sh

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2 Risks Returns A Close Family Friend Has Approached You To Help Her Determine Which Of The Two Common Stocks She Sh 1 (76.58 KiB) Viewed 10 times

2. RISKS & RETURNS: A close family friend has approached you to help her determine which of the two common stocks she should invest in. Common Stock A Return 11% 15% 19% Probability 0.3 Required: 0.4 0.3 Common Stock B Probability Return 0.2 -5% 6% 14% 22% Required: a) Calculate the expected returns of stock A b) Determine the risk (standard deviation) and return of stock A c) Calculate the expected returns of stock B 0.3 0.3 0.2 (3 marks) (4 marks) (5 marks) d) Determine the risk (standard deviation) and return of stock B (6 marks) e) Which investment should your friend invest in? (3 marks) f) Jenny has decided that she will invest her $100,000 savings in stocks as follows: Company Standards Company Limited Starbucks Treasury Bill Percentage of investment 25% 25% 50% Expected rate of return 9% 12% 4% What rate of return should Jenny expects to receive on her portfolio? (4 marks)