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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

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