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Highest standard deviation for the final? payoff

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Reference no: EM133062597

Suppose the? risk-free interest rate is 5%?, and the stock market will return either +21% or -14% each? year, with each outcome equally likely. Compare the following two investment? strategies: (1) invest for one year in the? risk-free investment, and one year in the? market, or? (2) invest for both years in the market.

a. Which strategy has the highest expected final? payoff?

b. Which strategy has the highest standard deviation for the final? payoff?

c. Does holding stocks for a longer period decrease your? risk?

Reference no: EM133062597

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