Consider the Following Probability Distribution for Stocks a and B

question 10

Multiple Choice

Consider the following probability distribution for stocks A and B: $\begin{array}{cccc}\underline{\text { State} } & \underline{\text { Probability }} & \underline{\text { Return on Stock A } }& \underline{\text { Return on Stock B }} \\1 & 0.15 & 8 \% & 8 \% \\2 & 0.20 & 13 \% & 7 \% \\3 & 0.15 & 12 \% & 6 \% \\4 & 0.30 & 14 \% & 9 \% \\5 & 0.20 & 16 \% & 11 \%\end{array}$

-The expected rates of return of stocks A and B are _____ and _____,respectively.

• A)13.2%; 9%
• B)13%; 8.4%
• C)13.2%; 7.7%
• D)7.7%; 13.2%
• E)none of the above

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