Use the following information of rates of return for Stock A and Stock B to answer;
Probability of State
State of Economy of Economy Return on A Return on B
Recession .50 -0.10 0.20
Boom .50 0.30 - 0.10
What comes closest to Stock A’s expected return and Stock B’s standard deviation?
A. Stock A’s expected return is 10% and Stock B’s standard deviation is 15%
B. Stock A’s expected return is 10% and Stock B’s standard deviation is 2%
C. Stock A’s expected return is 10% and Stock B’s standard deviation is 0%
D. Stock A’s expected return is 15% and Stock B’s standard deviation is 15%
E. Stock A’s expected return is 15% and Stock B’s standard deviation is 0%