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:

Monitor Lizards

A group of large lizards in the genus Varanus, known for their intelligence and predatory skills, found in Africa, Asia, and Oceania.

Venom Genes

Genetic sequences that code for the production of venom, a toxic substance used by some animals for defense or to capture prey.

Defensin Gene

A gene that codes for defensins, which are small cysteine-rich cationic proteins involved in the innate immune response.

Gene Recruitment

Gene recruitment refers to the co-option of a particular gene or network for a totally different function as a result of a mutation. The reorganization of a preexisting regulatory network can be a major evolutionary event.