Consider the Following Probability Distribution for Stocks a and B

question 45

Multiple Choice

Consider the following probability distribution for stocks A and B: $$\begin{array} { c c c c } \text { State } & \text { Probability } & \text { Return on Stock A } & \text { Return on Stock B } \\1 & 0.10 & 10 \% & 8 \% \\2 & 0.20 & 13 \% & 7 \% \\3 & 0.20 & 12 \% & 6 \% \\4 & 0.30 & 14 \% & 9 \% \\5&0.20 & 15 \% & 8 \%\end{array}$$
The expected rates of return of stocks A and B are _____ and ____,respectively.

• A) 13.2%;9%.
• B) 14%;10%
• C) 13.2%;7.7%
• D) 7.7%;13.2%
• E) none of these

---

Definitions:

Median

In an arranged sequence of values, the median is the number situated in the middle, thus separating the collection of numbers into two segments.

StdDev

Short for Standard Deviation, it measures the amount of variance or dispersion in a set of values.

Median

A value that divides a dataset into two equal halves, representing the middle value when the data set is ordered.

StdDev

A measurement that quantifies the amount of variation or dispersion in a set of data values, same as Standard Deviation.