Question: Use the following information to answer the questions below: Security Return(S1) Return(S2) A 16% 20% B 12% 25% Risk-free asset return = 4% S1 is

  1. Use the following information to answer the questions below:

Security Return(S1) Return(S2)

A 16% 20%

B 12% 25%

Risk-free asset return = 4%

S1 is State-1 and S2 is State-2;

Prob(S1) = 0.6; Prob(S2) = 0.4

i). What is the expected return on Security A and the expected return on Security B?

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