Distributions of Rates of Return for Companies AA and BB

question 83

True/False

distributions of rates of return for Companies AA and BB are given below:
$$\begin{array} { l c c c } { \begin{array} { c } \text { State of the } \\\text { Economy }\end{array} } & \begin{array} { c } \text { Probability of This } \\\text { State Occurring }\end{array} & \text { AA } & \text { BB } \\\text { Boom } & 0.2 & 30 \% & - 10 \% \\\text { Normal } & 0.6 & 10 \% & 5 \% \\\text { Recession } & 0.2 & - 5 \% & 50 \%\end{array}$$

We can conclude from the above information that any rational, risk-averse investor would be better off adding Security AA to a well-diversified portfolio over Security BB.

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Definitions:

In Vivo Desensitization

One key step in the behavioral treatment of a phobia in which the patient is gradually exposed to the phobic stimulus.

Systematic Desensitization

A therapeutic technique used to help individuals overcome phobias and anxiety by gradual exposure to the feared object or situation while teaching relaxation techniques.

Aversion Therapy

A psychological treatment method where undesirable behaviors are discouraged by associating them with unpleasant stimuli.

Contingency Management

A behavioral therapy technique that reinforces positive behavior with rewards or discourages negative behavior with penalties.