(a) Salma is considering to invest in either one of the jewelry companies - Pearl Berhad...

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(a) Salma is considering to invest in either one of the jewelry companies - Pearl Berhad or Diamond Berhad. Historical data suggests the following probability distribution for Salma's returns from these two jewelry companies. Decide which company would give a higher expected return. Probability of Occurrence 0.15 0.20 0.35 0.22 0.18 Pearl Berhad RM15,000 RM35,000 RM48,000 RM67,000 RM80,000 Diamond Berhad RM80,000 RM38,000 RM45,000 RM15,000 RM77,000 (7 marks) (b) The following is historical data for Security ABC and XYZ. i. Calculate the expected return and standard deviation for the securities ABC and XYZ. Year 1 2 3 4 5 Return for Sec ABC Return for Sec XYZ 0.25 0.16 0.25 0.15 0.35 0.20 0.15 0.12 0.10 0.09 (14marks) ii. Justify which of the two securities which an investor will invest in if investor is risk averse. (4 marks) (a) Salma is considering to invest in either one of the jewelry companies - Pearl Berhad or Diamond Berhad. Historical data suggests the following probability distribution for Salma's returns from these two jewelry companies. Decide which company would give a higher expected return. Probability of Occurrence 0.15 0.20 0.35 0.22 0.18 Pearl Berhad RM15,000 RM35,000 RM48,000 RM67,000 RM80,000 Diamond Berhad RM80,000 RM38,000 RM45,000 RM15,000 RM77,000 (7 marks) (b) The following is historical data for Security ABC and XYZ. i. Calculate the expected return and standard deviation for the securities ABC and XYZ. Year 1 2 3 4 5 Return for Sec ABC Return for Sec XYZ 0.25 0.16 0.25 0.15 0.35 0.20 0.15 0.12 0.10 0.09 (14marks) ii. Justify which of the two securities which an investor will invest in if investor is risk averse. (4 marks)

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a Expected Return Calculation To calculate the expected return for each jewelry company we multiply each return by its corresponding probability and t... View the full answer