Consider the following probability distribution for stocks C and D: The expected rates of return of stocks C and D are _____ and _____, respectively.
A)4.4%; 9.5%
B)9.5%; 4.4%
C)6.3%; 8.7%
D)8.7%; 6.2%
E)None of the options

Question

Consider the following probability distribution for stocks C and D:  The expected rates of return of stocks C and D are _____ and _____, respectively.
A)4.4%; 9.5% 
B)9.5%; 4.4% 
C)6.3%; 8.7% 
D)8.7%; 6.2% 
E)None of the options

Quizplus · Accepted Answer

E(R_C) = 0.30(7%) + 0.5(11%) + 0.20(-16%) = 4.4%; E(R_D) = 0.30(-9%) + 0.5(14%) + 0.20(26%) = 9.5%.

Consider the Following Probability Distribution for Stocks C and D