Question: Problem 2: (25 marks) You have estimated the following probabilities for earnings per share of companies X and Y: Probability X Y 0.2 0.5 0

Problem 2: (25 marks) You have estimated the following probabilities for earnings per share of companies X and Y: Probability X Y 0.2 0.5 0 0.3 1 0.5 0.1 15 0.5 0.4 2 1 a. Calculate the mean and the standard deviation of the earnings per share for each company, b. Explain how some investors might choose X and others might choose Y if preferences are based on mean and variance. Illustrate your answer with graphs, c. Compare X and Y, using the second-order stochastic dominance criterion. Problem 2: (25 marks) You have estimated the following probabilities for earnings per share of companies X and Y: Probability X Y 0.2 0.5 0 0.3 1 0.5 0.1 15 0.5 0.4 2 1 a. Calculate the mean and the standard deviation of the earnings per share for each company, b. Explain how some investors might choose X and others might choose Y if preferences are based on mean and variance. Illustrate your answer with graphs, c. Compare X and Y, using the second-order stochastic dominance criterion

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