Statistics

Respond with the word RED to show you have read and understood the assignment. Due within  hours.

The option that offers the greatest expected return is the best investment

Expected return for stock market

Expected return=

                              = (0.15 25%) + (0.35 20%)+ (0.25 5%) + (0.25 -14%)

                              = 8.5%

Expected return for gold

Expected return=

                              = (0.15 -30%) + (0.35 -9%)+ (0.25 5%) + (0.25 50%)

                              = 13.6%

Decision

Since the expected return for gold is higher than for the stock market, it is better to invest in gold.

****You base your answer on the amount of expected return. What if you calculated the risk involved with each? Would you choose the same? Calculate the risk for each and show your work.******