Question: You are trying to develop a strategy for investing in two different stocks. The anticipated annual return for a $1,000 investment in each stock under

You are trying to develop a strategy for investing in two different stocks. The anticipated annual return for a $1,000 investment in each stock under four different economic conditions has the following probability distribution:

Compute the
a. expected return for stock X and for stock Y.
b. standard deviation for stock X and for stock Y.
c. covariance of stock X and stock Y.
d. Would you invest in stock X or stock Y? Explain.

Returns Probability Economic Condition Stock Stock Y 0.1 0.3 ow growth 0.4 Moderate growth 0.2 Fast growth Recession -50-100 20 100 130 150 200 50

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