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Stocks R and S have the following probability distributions of return:
Returns
Probability Stock R Stock S
0.5 -2% 20%
0.1 10 12
0.4 15 2
a. Calculate the expected return for each stock.
b. Calculate the expected return of a portfolio consisting of 50% of each stock
c. Calculate the standard deviation of returns for each stock and for the portfolio. Which stock is considered riskier with respect to total risk?
d. Compute the coefficient of variation for each stock. According to the coefficient which stock is riskier?
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