Instruction: Complete ALL questions. Question 1 A. Use an example to explain the relationship among total, systematic and unsystematic risks. B. Stocks RJR Limited and SJL Limited have the following probability distributions of expected future returns: Probability RJR Limited SJL Limited 0.1 -10% -27.5% 0.2 2% 4% 0.4 12% 18% 0.2 20% 22.5% 0.1 39% 32.5% Calculate, for stocks RJR and SJL, the: i. expected rate of return. ii. standard deviation. iii. coefficient of variation. C. Which stock should a potential investor opt for? Why?
Instruction: Complete ALL questions.
Question 1
A. Use an example to explain the relationship among total, systematic and unsystematic
risks.
B. Stocks RJR Limited and SJL Limited have the following probability distributions of
expected future returns:
Probability RJR Limited SJL Limited
0.1 -10% -27.5%
0.2 2% 4%
0.4 12% 18%
0.2 20% 22.5%
0.1 39% 32.5%
Calculate, for stocks RJR and SJL, the:
i. expected
ii. standard deviation.
iii. coefficient of variation.
C. Which stock should a potential investor opt for? Why?
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