Darren Has the Option of Investing in Either Stock a or Stock

question 9

Multiple Choice

Darren has the option of investing in either Stock A or Stock B. There is a 45 percent chance that the return on Stock A will be 25 percent, a 25 percent chance it will be 14 percent, and a 30 percent chance it will be 4 percent. There is a 45 percent chance that the return on Stock B will be 30 percent, a 25 percent chance it will be 9 percent, and a 30 percent chance it will be2 percent. What is the expected rates of return on Stock A and Stock B?

• A)13.65%; 12.85%
• B)14.75%; 13.75%
• C)15.95%; 16.35%
• D)16.80%; 11.45%
• E)14.33%; 13.67%

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Definitions:

Equity

The principle of fairness and justice, ensuring that individuals receive treatment proportional to their contributions.

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A psychological phenomenon that occurs within a group of people, where the desire for harmony or conformity results in an irrational or dysfunctional decision-making outcome.

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A psychological state where an individual lacks self-awareness and feels less responsible for their actions, often due to being part of a group.