Consider the Following Probability Distribution for Stocks a and B

question 26

Multiple Choice

Consider the following probability distribution for stocks A and B: $$\begin{array} { c c c c } \text { State } & \text { Probability } & \text { Return on Stock A } & \text { Return on Stock B } \\\hline 1 & 0.10 & 10 \% & 8 \% \\2 & 0.20 & 13 \% & 7 \% \\3 & 0.20 & 12 \% & 6 \% \\4 & 0.30 & 14 \% & 9 \% \\5 & 0.20 & 15 \% & 8 \% \\\hline\end{array}$$ If you invest 40% of your money in A and 60% in B, what would be your portfolio's expected rate of return and standard deviation?

• A) 9.9%; 3%
• B) 9.9%; 1.1%
• C) 11%; 1.1%
• D) 11%; 3%
• E) None of the options are correct.

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