Consider the Following Probability Distribution for Stocks a and B

question 12

Multiple Choice

Consider the following probability distribution for stocks A and B: $$\begin{array} { c c c c } \text { State } & \text { Probability } & \text { Return on Stock A} & \text { Return on Stock B } \\1 & 0.10 & 10 \% & 8 \% \\2 & 0.20 & 13 \% & 7 \% \\3 & 0.20 & 12 \% & 6 \% \\4 & 0.30 & 14 \% & 9 \% \\5 & 0.20 & 15 \% & 8 \% \\\hline\end{array}$$ 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%

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