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Return and Measures of Risk. Stocks A and B has the following probability distributions of possible future returns: ...
Return and Measures of Risk. Stocks A and B has the following probability distributions of possible future returns:
Probability (pi) A (%) B (%)
0.1 _15 _20
0.2 0 10
0.4 5 20
0.2 10 30
0.1 25 50
(a) Calculate the expected rate of return for each stock and the standard deviation of
return for each stock, (b) Calculate the coefficient of variation, (c) Which stock is less risky? Explain.
