Question 1: Given the following information, calculate the expected value for Firm C’s EPS.
E(EPSA) = $5.10, and standard deviation A = $3.61
E(EPSB) = $4.20, and standard deviation B = $2.96
Standard deviation C = $4.11
|
Probability |
| |
0.1 |
0.2 |
0.4 |
0.2 |
0.1 |
| Firm A: EPSA |
($1.50) |
$1.80 |
$5.10 |
$8.40 |
$11.70 |
| Firm B: EPSB |
($1.20) |
$1.50 |
$4.20 |
$6.90 |
$9.60 |
| Firm C: EPSC |
($2.40) |
$1.35 |
$5.10 |
$8.85 |
$12.60 |
Question 2: Discuss the relative riskiness of the three firms (A,B,and C) earnings.