Consider the following probability distribution for stocks A and B: The expected rates of return of stocks A and B are _____ and _____, respectively.
A)13.2%; 9%
B)13%; 8.4%
C)13.2%; 7.7%
D)7.7%; 13.2%

Question

Consider the following probability distribution for stocks A and B:  The expected rates of return of stocks A and B are _____ and _____, respectively.
A)13.2%; 9% 
B)13%; 8.4% 
C)13.2%; 7.7% 
D)7.7%; 13.2%

Quizplus · Accepted Answer

E(R_A) = 0.15(8%) + 0.2(13%) + 0.15(12%) + 0.3(14%) + 0.2(16%) = 13%; E(R_B) = 0.15(8%) + 0.2(7%) + 0.15(6%) + 0.3(9%) + 0.2(11%) = 8.4%.

Consider the Following Probability Distribution for Stocks a and B