Questions: If you have 10,000 to invest, what stock would you buy under the following circumstances? You are nearing retirement and need a stable investment for the future. Facebook General Electric (GE) Coca-Cola

Solution Steps

The mean price for Coca-Cola (KO) is calculated using the formula:

\[ \mu = \frac{\sum_{i=1}^N x_i}{N} = \frac{555.46}{12} = 46.29 \]

The variance for Coca-Cola (KO) is calculated as follows:

\[ \sigma^2 = \frac{\sum (x_i - \mu)^2}{n-1} = 0.21 \]

The standard deviation is then:

\[ \text{Standard Deviation} = \sqrt{0.21} = 0.45 \]

The mean price for Facebook (FB) is calculated using the formula:

\[ \mu = \frac{\sum_{i=1}^N x_i}{N} = \frac{1986.13}{12} = 165.51 \]

The variance for Facebook (FB) is calculated as follows:

\[ \sigma^2 = \frac{\sum (x_i - \mu)^2}{n-1} = 6.49 \]

The standard deviation is then:

\[ \text{Standard Deviation} = \sqrt{6.49} = 2.55 \]

The mean price for General Electric (GE) is calculated using the formula:

\[ \mu = \frac{\sum_{i=1}^N x_i}{N} = \frac{120.74}{12} = 10.06 \]

The variance for General Electric (GE) is calculated as follows:

\[ \sigma^2 = \frac{\sum (x_i - \mu)^2}{n-1} = 0.02 \]

The standard deviation is then:

\[ \text{Standard Deviation} = \sqrt{0.02} = 0.13 \]

The standard deviations for the stocks are as follows:

• Coca-Cola (KO): \(0.45\)
• Facebook (FB): \(2.55\)
• General Electric (GE): \(0.13\)

Since General Electric (GE) has the lowest standard deviation, it is the most stable stock to invest in.

Final Answer