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Darren Has the Option of Investing in Either Stock a or Stock

Question 16

Multiple Choice

Darren has the option of investing in either Stock A or Stock B. There is a 45 percent chance that the return on Stock A will be 25 percent, a 25 percent chance it will be 14 percent, and a 30 percent chance it will be 4 percent. There is a 45 percent chance that the return on Stock B will be 30 percent, a 25 percent chance it will be 9 percent, and a 30 percent chance it will be2 percent. What is the expected rates of return on Stock A and Stock B?


A) 13.65%; 12.85%
B) 14.75%; 13.75%
C) 15.95%; 16.35%
D) 16.80%; 11.45%
E) 14.33%; 13.67%

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