Compute the expected return

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Your rate of return expectations for the stock of Kayleigh Cosmetics Company during the next year are:

kayleigh Cosmetics Co.

Possible Rate of Return Probilit

-0.6 0.15

-0.3 0.10

-0.1 0.05

0.2 0.4

0.4 0.2

0.8 0.1

Compute the expected return [E(Ri)] on this stock, the variance (a2) of this return, and its standard deviation (σ').

On the basis of expected return [E(Ri ) ] alone, discuss whether Gray Cloud or Kayleigh Cosmetics is preferable.

On the basis of standard deviation (σ') alone, discuss whether Gray Cloud or Kayleigh Cosmetics is preferable.

Compute the coeffìcients of variation (CVs) for Gray Cloud and Kayleigh Cosmetics and discuss which stock return series has the greater relative dispersion.

Reference no: EM132355805

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