Consider the Following Probability Distribution for Stocks a and B

question 61

Multiple Choice

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

• A) The portfolio with 20 percent in A and 80 percent in B.
• B) The portfolio with 15 percent in A and 85 percent in B.
• C) The portfolio with 26 percent in A and 74 percent in B.
• D) The portfolio with 10 percent in A and 90 percent in B.
• E) A and B are both on the efficient frontier.

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