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You want to develop a strategy for investment. You can invest in two different stocks, stock A or stock B. Stock A has an expected rate of return of 71 and standard deviation of 61.88. In addition, the following information is known regarding the economic conditions of the market and the rate of rate of returns: Economic condition Probability Rate of rate of return Rate of rate of return Stock A Stock B Recession 0.1 Slow growth 0.3 Moderate growth 0.4 Fast growth 0.2 a. Would you invest in stock A, or stock B? Why? b. If you are able to divide your money and put in a portfolio of 30% in stock A and 70% in stock B. Would you invest in stock A, or stock B or the portfolio? Why? -50 20 150 100 100 -50 100 150 You want to develop a strategy for investment. You can invest in two different stocks, stock A or stock B. Stock A has an expected rate of return of 71 and standard deviation of 61.88. In addition, the following information is known regarding the economic conditions of the market and the rate of rate of returns: Economic condition Probability Rate of rate of return Rate of rate of return Stock A Stock B Recession 0.1 Slow growth 0.3 Moderate growth 0.4 Fast growth 0.2 a. Would you invest in stock A, or stock B? Why? b. If you are able to divide your money and put in a portfolio of 30% in stock A and 70% in stock B. Would you invest in stock A, or stock B or the portfolio? Why? -50 20 150 100 100 -50 100 150
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a Expected return of Stock A 01 50 03 20 04 100 02 150 71 Expected retur... View the full answer
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
Posted Date:
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