[10] You are thinking about investing your money in the stock market. You have the following...

  

Transcribed Image Text:

[10] You are thinking about investing your money in the stock market. You have the following two stocks in mind: stock A and stock B. You know that the economy can either go in recession or it will boom. Being an optimistic investor, you believe the likelihood of observing an economic boom is two times as high as observing an economic depression. You also know about the probability distribution of X= Percentage return to investment for the two stocks A and B as follows: State of the Economy Boom Recession Probability 2/3 1/3 Investment A Return 9 6 Investment B Return -2 35 a) Calculate the expected return for stock A and expected return for stock B b) Calculate the standard deviation (a measure of total risk) for stock A and standard deviation for stock B. [10] You are thinking about investing your money in the stock market. You have the following two stocks in mind: stock A and stock B. You know that the economy can either go in recession or it will boom. Being an optimistic investor, you believe the likelihood of observing an economic boom is two times as high as observing an economic depression. You also know about the probability distribution of X= Percentage return to investment for the two stocks A and B as follows: State of the Economy Boom Recession Probability 2/3 1/3 Investment A Return 9 6 Investment B Return -2 35 a) Calculate the expected return for stock A and expected return for stock B b) Calculate the standard deviation (a measure of total risk) for stock A and standard deviation for stock B.