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The following information about two stocks, A and B, are given dependent on various states of the economy: State of the Economy Probability of Occurrence

The following information about two stocks, A and B, are given dependent on various states of the economy: State of the Economy

Probability of Occurrence

Expected Return for Stock A

Expected Return for Stock B

High Growth

0.1

60%

5%

Moderate Growth

0.2

20%

25%

No Growth

0.5

10%

5%

Recession

0.2

-25%

0%

What are the expected returns and standard deviations for each stock?

Given this information what can you say about the riskiness of each stock relative to the other?

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