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Expected returns for A B and C.docx


Please undo the withdrawal. I had been caught with a network problem

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a. Expected returns for A B and C 𝐸(𝑅𝐴 ) = 0.6 βˆ— 0.15 + 0.40 βˆ— 0.18 = 0.162 𝐸(𝑅𝐡 ) = 0.6 βˆ— 0.23 + 0.4 βˆ— 0.8 = 0.458 𝐸(𝑅𝐢 ) = 0.6 βˆ— 0.42 + 0.4 βˆ— βˆ’0.09 = 0.216 Expected return in two decimal places for stock A B and C are as follow; 𝐸(𝑅𝐴 ) = 0.16 𝐸(𝑅𝐡 ) = 0.46 𝐸(𝑅𝐢 ) = 0.22 b. Variance Variance for A and B we use probability of 24% 𝜎 2𝐴 = 0.6(0.15 βˆ’ 0.24)2 + 0.4(0.18 βˆ’ 0.24)2 = 0.0063 𝜎 2 𝐡 = 0.6(0.23 βˆ’ 0.24)2 + 0.40(0.8 βˆ’ 0.24)2 = 0.1255 Variance for C we use the probability of 56% 𝜎 2 𝐢 = 0.6(0.42 βˆ’ 0.56)2 + 0.4(βˆ’0.09 βˆ’ 0.56)2 = 0.18076 Variance in 6 Decimal places : A = 0.006300 B = 0.125500 C = 0.180760
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