The stock of Box Limited performs relatively well to other stocks during recessionary periods. The stock of Cox Limited, on the other hand, does well during growth periods. Both the stocks are currently selling for 100 per share. You assess the rupee return (dividend plus price) of these stocks for the next year as follows:
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Economic Condition |
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High growth |
Low growth |
Stagnation |
Recession |
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| Probability
Return on Box’s stock Return on Cox’s stock |
0.3 100 150 |
0.4 110 130 |
0.2 120 90 |
0.1 140 60 |
Calculate the expected return and standard deviation of investing:
(a) 1,000 in the equity stock of Box Limited
(b) 1,000 in the equity stock of Cox Limited
(c) 500 each in the equity stock of Box Limited and Cox Limited.
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