The Economics of Money, Banking and Financial Markets 4th Edition by Frederic Mishkin

Exercise 26

Suppose you visit with a financial adviser, and you are considering investing some of your wealth in one of three investment portfolios: stocks, bonds, or commodities. Your financial adviser provides you with the following table, which gives the. probabilities of possible returns from each investment:
a. Which investment should you choose to maximize your expected return: stocks, bonds, or commodities?
b. If you are risk-averse and have to choose between the stock and the bond investments, which should you choose? Why?