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The following table provides a security analyst's expected return on two stocks in two particular scenarios for the market return. State Probability Market return %
The following table provides a security analyst's expected return on two stocks in two particular scenarios for the market return.
State | Probability | Market return % | Stock A return % | Stock B return % |
---|---|---|---|---|
Poor | 0.25 | 4 | 5.5 | 3.8 |
Good | 0.75 | 15 | 33 | 12.6 |
What is the value of the risk free rate in the above economy?
a.
3%
b.
2.5%
c.
3.5%
d.
2%
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