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Suppose you have $200 with which you can buy shares of stock from two companies: ABC Hot Chocolate Company and XYZ Lemonade. Each company's stock

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Suppose you have $200 with which you can buy shares of stock from two companies: ABC Hot Chocolate Company and XYZ Lemonade. Each company's stock currently sells for $100 per share. ABC hot chocolate company: If the temperature next year is lower than average, the interest rate will be 20%. There is a 50% chance that it will be colder than average next year. But if the temperature is warmer (50% chance), there is no returns from this stock. XYZ lemonade: If the temperature next year is higher than average, the interest rate will be 20%. There is a 50% chance that it will be warmer than average. But if the temperature is colder (50% chance), there is no returns from this stock Choice 1: Only buy 2 stocks from ABC hot chocolate company. Choice 2: Only buy 2 stocks from XYZ lemonade company. Choice 3: buy 1 stock from ABC and buy 1 stock from XYZ. Question: 1. Please calculate the expected return rate for every stock from each company. 2. please calculate the expected return for each choice. 3. Please compare the risk for these three choices and choose which one choice is more riskless. (eg: for choice 1, 50% chance to get 20$, but also 50% chance get nothing)

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