Darren has the option of investing in either Stock A or Stock B. The probability of the return of Stock A being 25% is 0.45, 14% is 0.25, and 4% is 0.30. The probability of the return of Stock B being 30% is 0.30, 9% is 0.25, and 2% is 0.30. Given the probability distributions for the two investments, what is the expected rate of return for Stock A and Stock B? a. 13.65%; 12.85% b. 14.75%; 13.75% c. 15.95%; 11.85% d. 16.80%; 11.45% e. 17.82%; 11.95%

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Darren has the option of investing in either Stock A or Stock B. The probability of the return of Stock A being 25% is 0.45, 14% is 0.25, and 4% is 0.30. The probability of the return of Stock B being 30% is 0.30, 9% is 0.25, and 2% is 0.30. Given the probability distributions for the two investments, what is the expected rate of return for Stock A and Stock B?

a. 13.65%; 12.85%

b. 14.75%; 13.75%

c. 15.95%; 11.85%

d. 16.80%; 11.45%

e. 17.82%; 11.95%

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