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Suppose there are three securities (A, B, and C) to choose from, and next year the economy will be in an expansion, normal, or recession
Suppose there are three securities (A, B, and C) to choose from, and next year the economy will be in an expansion, normal, or recession state with probabilities 0.28, 0.38, and 0.34, respectively. The returns (%) on the securities in these states are as follows. Security A {expansion = +15.53, normal = +8.00, recession = +6.00}; Security B {+25.21, +11.00, -11.00}; Security C {+7.50, +7.50, +7.50}. If the investor is risk neutral (means that she does not care/worry about risk), which of these three securities would she buy?
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