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You Are Comparing Share a to Share B A)Share A; Because It Has an Expected Return of 7

Question 61

Multiple Choice

You are comparing share A to share B. Given the following information, which one of these two shares should you prefer and why?
\multicolumn2l Rate of Return if State Occurs  State of Economy  Probability of State of Economy  Share A  Share B  Boom 60%9%15% Recession 40%4%6%\begin{array} { | l | l | l | l | } \hline & & \multicolumn{2}{|l|} { \text { Rate of Return if State Occurs } } \\\hline \text { State of Economy } & \text { Probability of State of Economy } & \text { Share A } & \text { Share B } \\\hline \text { Boom } & 60 \% & 9 \% & 15 \% \\\hline \text { Recession } & 40 \% & 4 \% & 6 \% \\\hline\end{array}


A) Share A; because it has an expected return of 7% and appears to be more risky.
B) Share A; because it has a higher expected return and appears to be less risky than share B.
C) Share A; because it has a slightly lower expected return but appears to be significantly
Less risky than share B.
D) Share B; because it has a higher expected return and appears to be just slightly more risky
Than share A.
E) Share B; because it has a higher expected return and appears to be less risky than share A.

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