You are comparing stock A to stock B Given the following information, which one of these two Stocks should you prefer and why Rate of Return if State Occurs State of the Economy Probability of State of the Economy Stock A Stock B Boom 55 13 8 Recession 45 5 3 a Stock A because it has a higher expected return and appears to be less risky than stock B b Stock A because it has a lower expected return but appears to be less risky than stock B c Stock B because it has a higher expected return and appears to be more risky than stock A d Stock B because it has a higher expected return and appears to be less risky than stock A

Question

You are comparing stock A to stock B  Given the following information, which one of these two Stocks should you prefer and why  Rate of Return if State Occurs State of the Economy Probability of State of the Economy Stock A Stock B Boom 55  13  8  Recession 45   5  3  a  Stock A  because it has a higher expected return and appears to be less risky than stock B  b  Stock A  because it has a lower expected return but appears to be less risky than stock B  c  Stock B  because it has a higher expected return and appears to be more risky than stock A  d  Stock B  because it has a higher expected return and appears to be less risky than stock A

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a.	Stock A; because it has a higher expected return and appears to be less risky than stock B.
b.	Stock A; because it has a lower expected return but appears to be less risky than stock B.
c.	Stock B; because it has a higher expected return and appears to be more risky than stock A.
d.	Stock B; because it has a higher expected return and appears to be less risky than stock A.

Question

You are comparing stock A to stock B. Given the following information, which one of these two Stocks should you prefer and why? Rate of

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		Rate of Return if State Occurs
State of the Economy	Probability of State of the Economy	Stock A	Stock B
Boom	55%	13%	8%
Recession	45%	-5%	3%