You are comparing stock A to stock B.Given the following information,what is the difference in the expected returns of these two securities?
A)-0.85 percent
B)2.70 percent
C)3.05 percent
D)13.45 percent
E)13.55 percent

Question

You are comparing stock A to stock B.Given the following information,what is the difference in the expected returns of these two securities? 
A)-0.85 percent 
B)2.70 percent 
C)3.05 percent 
D)13.45 percent 
E)13.55 percent

Quizplus · Accepted Answer

E(r)_A = (0.45 × 0.12) + (0.55 × -0.22) = -6.70 percentE(r)_B = (0.45 × 0.17) + (0.55 × -0.31) = -9.40 percentDifference = -6.70 percent - (-9.40 percent) = 2.70 percent

You Are Comparing Stock a to Stock B