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?
What is the risk of Security B?
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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