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David owns a two-stock portfolio that invests in Celestial Crane Cosmetics Company (CCC) and Lumbering Ox Truckmakers (LOT). Three-quarters of David's portfolio value consists of
David owns a two-stock portfolio that invests in Celestial Crane Cosmetics Company (CCC) and Lumbering Ox Truckmakers (LOT). Three-quarters of David's portfolio value consists of CCC's shares, and the balance consists of LOT's shares. Each stock's expected return for the next year will depend on forecasted market conditions. The expected returns from the stocks in different market conditions are detailed in the following table: alculate expected returns for the individual stocks in David's portfolio as well as the expected rate of return of the entire portfolio over the three ossible market conditions next year. The expected rate of return on Celestial Crane Cosmetics's stock over the next year is The expected rate of return on Lumbering Ox Truckmakers's stock over the next year is The expected rate of return on David's portfolio over the next year is For example, the continuous probability distributions of rates of return on stocks for two different companies are shown on the following graph: Based on the graph's information, which of the following statements is true? Company A has lower risk. Company B has lower risk
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