Question: Answer the following question based on the information below: State of Economy Probability Stock As return Stock Bs return Boom .4 15% - 30% Recession

Answer the following question based on the information below:

State of Economy

Probability

Stock As return

Stock Bs return

Boom

.4

15%

- 30%

Recession

.6

5%

40%

Which of the following statements is true?

a) Stock A has higher expected return than stock B.

b) The actual return of stock A will always be greater than that of stock B.

c) Stock A has higher total risk than stock B.

d) Stocks A and B are positively correlated.

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