Stocks: Expected Return and Standard Deviation
Not what you're looking for?
You are trying to develop a strategy for investing in two different stocks. The anticipated annual return for $1000 investment in each stock under four different economic conditions has the following probability distribution:
Returns
Probability Economic Condition Stock X (in $'s) Stock Y (in $'s)
0.1 Recession - 50 - 100
0.3 Slow growth 20 50
0.4 Moderate growth 100 130
0.2 Fast growth 150 200
Note: Return means the net change in your initial investment ($1000) after a year, for example, Return=-100 (negative return), it means that after one year, your wealth become $900.
(a) Compute the expected return for stock X and for stock Y.
(b) Compute the standard deviation for stock X and for stock Y.
Purchase this Solution
Solution Summary
This solution is comprised of detailed step-by-step calculations and analysis of the given problem and provides students with a clear perspective of the underlying concepts.
Solution Preview
Problem: You are trying to develop a strategy for investing in two different stocks. The anticipated annual return for $1000 investment in each stock for four different economic conditions has the following probability ...
Purchase this Solution
Free BrainMass Quizzes
Know Your Statistical Concepts
Each question is a choice-summary multiple choice question that presents you with a statistical concept and then 4 numbered statements. You must decide which (if any) of the numbered statements is/are true as they relate to the statistical concept.
Terms and Definitions for Statistics
This quiz covers basic terms and definitions of statistics.
Measures of Central Tendency
Tests knowledge of the three main measures of central tendency, including some simple calculation questions.
Measures of Central Tendency
This quiz evaluates the students understanding of the measures of central tendency seen in statistics. This quiz is specifically designed to incorporate the measures of central tendency as they relate to psychological research.