View the step-by-step solution to:

# Security A: Probability 30% of Return 7%; Probability 50% of Return 12%; Probability of 20% of Return 17%. Security B:

Security A: Probability 30% of Return 7%; Probability 50% of Return 12%; Probability of 20% of Return 17%.

Security B: Probability 35% of Return 6%; Probability 65% of Return 16%

What is the expected return for Security A?

3.83%

12%

11.50%

13.67%

6 points

What is the risk of Security B?

22.75%

4.77%

5.60%

11.0%

6 points

Which security would you purchase?

Security B because it has more expected return

Security A because it has less riskIt would depend on your risk tolerance.

Security B has more return and more risk. A risk taker would invest in B but someone risk adverse would probably take Security A

Security A because has more return and less risk

Here is the... View the full answer

### Why Join Course Hero?

Course Hero has all the homework and study help you need to succeed! We’ve got course-specific notes, study guides, and practice tests along with expert tutors.

### -

Educational Resources
• ### -

Study Documents

Find the best study resources around, tagged to your specific courses. Share your own to gain free Course Hero access.

Browse Documents