7. What are the expected returns for Stock A and Stock B respectively?

State Probability Return on A Return on B

Boom .10 16% -2%

Normal .50 10% 5%

Bust .40 5% 9%

A) 8.0%, 6.5% B) 8.6%, 5.5% C) 8.2%, 3.9%D) 8.6%, 5.9%