leam-coo08ick m15594197 Joshua owns a two-stock portfolio that invests in Falcon Freight Company (FF)) and Pheasant Pharmaceuticals (PP). Three-quarters of Joshua's portfolio value consists of FF's shares,, and the balance consists of PP's shares. Fach stock's expected return for the next year will depend on forecasted market condition. The expected returns from the stocks in different market conditions are detailed in the following table: Market Condition Probability of Occurrence Falcon Freight Pheasant Pharmaceuticals Strong 25% 40% 56% Normal 45% 24% 32% Weak 30% -40% -32 % Calculate expected returns for the individual stocks in Joshua's portfolio as well as the expected rate of return of the entire portfolio over the three possible market conditions next year. The expected rate of return on Falcon Freight's stock over the next year is 13.44% The expected rate of return on Pheasant Pharmaceuticals's stock over the next vear is The expected rate of return on Joshua's portfolio over the next year is The expected returns for Joshua's portfolio were calculated based on three possible conditions in the market. Such conditions will vary from time to time, and for each condition there will be a specific outcome. These probabilities and outcomes can be represented in the form of a continuous probability distribution graph. For example, the continuous probability distributions of rates of return on stocks for two different companies are shown on the following graph: PROBABILITY DENSITY Company A The expected returns for Joshua's portfolio were calculated based on three possible conditions in the market. Such conditions will vary from time to time, and for each condition there will be a specific outcorme. These probabilities and outcomes can be represented in the form of a continuous probability distribution graph. For example, the continuous probability distributions of rates of return on stocks for two different companies are shown on the following graph: PROBABILITY DENSITY Company A Company B -40 -20 20 0 40 60 RATE OF RETURN IPercenti Based on the graph's information, which of the following statements is true? O Company A has lower risk O Company B has lower risk. ash Mayer wIN 32.n.0 c97