FINANCIAL MARKET

Mary Enterprises is evaluating two projects whose returns are normally distributed. These projects have the following characteristics: Project X Project Y Net investment P50,000 P250,000 Expected return 100,000 500,000 Standard deviation 20,000 100,000 Coefficient of variation 0.20 0.20 1. Which project will you choose if decision is based on: 1.1 Standard deviation? 1.2 Coefficient of variation?2. Which is more appropriate risk measure in the situation - standard deviation or coefficient of variation? Justify your answer.Activity 2. Analyze and answer the problem. You plan to form a portfolio of two stocks. Gigabyte Computers and Mega Value Food Stores, and are considering two different options involving the weight of each stock in your portfolio. You estimate the correlation coefcient of the returns between Gigabyte and Mega Value to be [31,: = + 0.5. Other characteristics of the two stocks are as shown below: Gigabyte Mega Value Computers Food Stores Expected return {I'} 24% 3% Standard deviation for} 16% 2% Weight of each stock in the portfolio {vs} Plan A 60% 40% Plan B 20% 30% 1. Compute the expected portfolio return of Plan A and Plan B. \f3. How will the results of the computation affect your investment decision? Discuss your portfolio of choice