Question

and why? Thanks!

5.2 Risk and Risk Premiums Which portfolio is more risky? Spreadsheet 5.1 2 Scenario analysis for the stock market Column 8 x Deviation from Column B x Squared Deviation 110.45 110.25 6.40 120.00 347.10 8.63 Probability HPR()Column C Mean Return 3 Scenario 4 1. Severe recession 005 5 2. Mild recession -47.00 21.00 4.00 .37 3 Normal growth 7 4 Boom 8 Column sums: 14 30 Expected return 0.25 0 40 0 30 1.85 2.75 5.60 9.0020.00 10.00 Square root of variance- Standard deviation (%)- Spreadsheet 5.1 2 Scenario analysis for the stock market Column B x Deviation from Column B x Squared 3 Scenario 4 1 Severe recession Probability HPR () Column C Mean ReturnDeviation 05 0.25 0 40 0 30 39 039 1.95 2.25 4.84 9.36 10.00 -49.04 19.00 2.11 21.20 120.2512293 90.26947605 1.78 134.81 347 10 | 5-2 Mi, ession 6 3 Norhal growth 7 4 Boom 8 Column sums: 12 11 31.2 Square root of variance- Standard deviation (%)

Answer 1

What can be read from the given image is that both the portfolios are having expected return as 10% and standard dev = 18.63%.

Given it is true, it can be concluded that both the portfolios have same risk measure.

Risk is measured by standard deviation and in this case both the scenarios are having same SD and hence same risk/