Given six years of percentage return of Stock A and Stock B, identify the expected return, and risk of each instrument. Assume that each year, has equal chances of reoccurrence. Stock AStock B20X1102020X2-15-2020X320-1020X4253020X5-30-2020X62060 Which of the two stocks is riskier? Why? Which of the stocks is expected to yield a higher return? Why? Where will you invest?

1) Computation: Step 2 Hence, stock B is riskier than stock A.

Answered: Which of the two stocks is riskier?…

Which of the two stocks is riskier? Why? Which of the stocks is expected to yield a higher return? Why? Where will you invest?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 12P

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Question

Given six years of percentage return of Stock A and Stock B, identify the expected return, and risk of each instrument. Assume that each year, has equal chances of reoccurrence.

	Stock A	Stock B
20X1	10	20
20X2	-15	-20
20X3	20	-10
20X4	25	30
20X5	-30	-20
20X6	20	60

Which of the two stocks is riskier? Why?

Which of the stocks is expected to yield a higher return? Why?

Where will you invest?

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