. Summerville Inc. is considering an investment in one of two common stocks.

Economy

Given the information below, please compute

a. Expected return for stock A and stock B

b. Risk for stock A and stock B

c. Using the expected return and risk, please determine which one is a better

investment for a risk-averse investor.

Economy State COMMON STOCK A COMMON STOCK B PROBABILITY RETURN PROBABILITY RETURN Recession 0.25 11% 0.1 -6% Recovery 0.5 16% 0.4 5% Expansion 0.25 19% 0.4 14% Boom 0.1 22%