• Suppose you visit with a financial adviser, and you are considering investing some of your wealth in one of three investment portfolios: stocks, bonds, or commodities. Your financial adviser provides you with the following table, which gives the probabilities of possible returns from each investment:

Stocks		Bonds		Commodities
Probability	Return	Probability	Return	Probability	Return
0.2	15%	0.4	15%	0.2	20%
0.3	8.3%	0.6	5%	0.25	12%
0.2	10%			0.25	6%
0.3	5%			0.2	5%
					0.10%

Which investment should you choose to maximize your expected return: stocks, bonds, or commodities? (15p)

If you are risk-averse and have to choose between the stock and the bond investments, which should you choose? Why? (25p)