Question

Step 1

First question: Please examine the graph of the probability of the rate of return.

- Compnay B has a wider spread of rate of return in comparison to A
- Higher the spread or variability of return , higher will be the standard deviation
- Hence, A has smaller standard deviation.
- Henc, the correct answer is the firt option.

Step 2

Second question:

Please see the white board.

E(R) = The expected retrun

Pi = probability of market condition i

R...

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