The Distributions of Rates of Return for Companies AA and BB

question 64

True/False

The distributions of rates of return for Companies AA and BB are given below:​ $\begin{array}{lcccc} \text { State of } & \text {Probability of } \\{\text { Economy }} & \text { State Occurring } & \text { A.A } & \text { B B } \\\hline \text { Boom } & 0.2 & 30 \% & -10 \% \\\text { Normal } & 0.6 & 10 \% & 5 \% \\\text { Recession } & 0.2 & -5 \% & 50 \%\end{array}$ We can conclude from the above information that any rational risk-averse investor will add Security AA to a well-diversified portfolio over Security BB.

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