Rate of return (%) |
||
Probability |
Stock A |
Stock B |
0.1 |
10 |
35 |
0.2 |
2 |
0 |
0.4 |
12 |
20 |
0.2 |
20 |
25 |
0.1 |
38 |
45 |
Expected Return of Stock A
=0.1*10%+0.2*2%+0.4*12%+0.2*20%+0.1*38% =14%
Expected Return of Stock B =0.1*35%+0.2*0%+0.4*20%+0.2*25%+0.1*45%
=21%
Option A is the correct option
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