Problem 4

Intro

We know the following expected returns for stocks A and B, given different states of the economy:

State (s)	Probability	E(rA,s)	E(rB,s)
Recession	0.3	-0.05	0.05
Normal	0.5	0.1	0.08
Expansion	0.2	0.18	0.12

Attempt 1/3 for 10 pts.

Part 1

What is the expected return for stock A?

Submit

Attempt 1/3 for 10 pts.

Part 2

What is the expected return for stock B?