Question: Investment A return Probability Occurrence -10 % 20 % 5 40 15 30 25 10 Investment B return Probability Occurrence -10 % 20 % 5

Investment A

return Probability Occurrence

-10 % 20 %

5 40

15 30

25 10

Investment B

return Probability Occurrence

-10 % 20 %

5 40

15 30

39 10

You are considering purchasing two stocks with the following possible returns and probabilities or occurrence.

Compare the expected returns and risks (as measured by the standard deviations) of each investment. Which investment offers the giver higher expected return? Which investment is riskier ? Compare their relative risks by computing the coefficient of variation.

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