An Investor Is Analyzing the Risk Two Stocks a and B

question 62

Essay

An investor is analyzing the risk two stocks A and B within three expected states of the economy.If a boom economy occurs, stock A will provide an 8% return, while stock B will provide a 10% return; if an average economy transpires, stock A will provide a 5 return, while stock B will provide a 5% return; if a bust economy transpires, stock A will provide a -11% return and stock B will provide a -15% return.It is expected that there will be a 60% probability of an average return.Boom and Bust states have an equal chance of occurring.Determine which stock is riskier given the state information.

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Definitions:

Recess

A period of time when proceedings or activities are temporarily suspended, often used in educational settings for breaks.

Misbehaved

Exhibiting behavior that is not acceptable based on societal or situational norms.

Cognitive-Behavioral Therapy

A therapeutic approach that addresses dysfunctional emotions, behaviors, and cognitions through goal-oriented, systematic procedures.

Aggressive Impulses

Refers to strong feelings or urges to act out in aggression or hostility.