The probability distributions of expected returns for stocks XMX and BMX are as follows: Probability Stock XMX (%) Stock BMX (%) 0.10 (15) (25) 0.20 0.40 17 0.20 10 30 0.10 25 60 а. Calculate the expected return for stock XMX and BMX b. Calculate the variances, standard deviation and Coefficient of variation for stock XMX and BMX. C. Which is the riskier of the two stocks? Why?
The probability distributions of expected returns for stocks XMX and BMX are as follows: Probability Stock XMX (%) Stock BMX (%) 0.10 (15) (25) 0.20 0.40 17 0.20 10 30 0.10 25 60 а. Calculate the expected return for stock XMX and BMX b. Calculate the variances, standard deviation and Coefficient of variation for stock XMX and BMX. C. Which is the riskier of the two stocks? Why?
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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Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.
Question
Transcribed Image Text:QUESTION 1
The probability distributions of expected returns for stocks XMX and BMX are as follows:
Probability
Stock XMX (%)
Stock BMX (%)
0.10
(15)
(25)
0.20
0.40
17
0.20
10
30
0.10
25
60
а.
Calculate the expected return for stock XMX and BMX
b.
Calculate the variances, standard deviation and Coefficient of variation for stock
ХMX and BMX.
C.
Which is the riskier of the two stocks? Why?
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