Suppose there are five stocks available for investment and each has an annual mean return of 10 and a standard deviation of 4 Assume the returns on the stocks are independent random variables a If you invest 20 of your money in each stock, find the mean and standard deviation of the annual dollar r...

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Suppose there are five stocks available for investment and each has an annual mean return of 10%

Question:

Suppose there are five available for investment and each has an annual mean return of 10% and a standard deviation of 4%. Assume the returns on the are independent random variables.
a. If you invest 20% of your money in each stock, find the mean and standard deviation of the annual dollar return on your investments.
b. If you invest $100 in a single stock, determine the mean and standard deviation of the annual return on your investment.
c. How do the answers to parts a and b relate to the phrase, “Don’t put all your eggs in one basket”?

Stocks
Stocks or shares are generally equity instruments that provide the largest source of raising funds in any public or private listed company's. The instruments are issued on a stock exchange from where a large number of general public who are willing...