Consider the following stocks with equal probabilities of return: Outcome Return Stock A Return Stock B 1 -5% 2% 2 10% 12% 3 18% 15% a. compute the expected returns of stock A and B. b. compute the total risk and relative risk of stock A and B. Which stock is risky? c. Ignoring the probabilities, what is the total risk and relative risk of stock A and B? Which stock is risky? Round-off final answers only to two decimal places. Attach hand-written/excel solution here.
Consider the following stocks with equal probabilities of return: Outcome Return Stock A Return Stock B 1 -5% 2% 2 10% 12% 3 18% 15% a. compute the expected returns of stock A and B. b. compute the total risk and relative risk of stock A and B. Which stock is risky? c. Ignoring the probabilities, what is the total risk and relative risk of stock A and B? Which stock is risky? Round-off final answers only to two decimal places. Attach hand-written/excel solution here.
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter3: Risk And Return: Part Ii
Section: Chapter Questions
Problem 3P: Two-Asset Portfolio
Stock A has an expected return of 12% and a standard deviation of 40%. Stock B...
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