You have estimated the following probabilities for earnings per share of companies A and B:

(a) Calculate the mean and variance of the earnings per share for each company.
(b) Explain how some investors might choose A and others might choose B if preferences are based on mean and variance.
(c) Compare A and B, using the second-order stochastic dominance criterion.

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Probability A B 0.0050 50 25 100 50 2 200 300 1 3.00 4.00 .2