Suppose you visit with a financial adviser, and you are considering investing some of your wealth in one of three investment portfolios: stocks, bonds, or commodities. Your financial adviser provides you with the following table, which gives the probabilities of possible returns from each investment: Stocks Bonds Commodities Probability Return Probability Return Probability Return 0.25 12% 0.6 10% 0.2 20% 0.25 10% 0.4 7.50% 0.25 12% 0.25 8% 0.25 6% 0.25 6% 0.25 4% 0.05 0%

A.Which investment should you choose to maximize your expected returns: Stock, Bonds, commodities?

B. If you are risk-averse and had to choose between the stock or the bond investments, you would

choose, and why?