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You are comparing Stock A to Stock B. Given the following information, what is the difference in the expected returns of these two securities? State
You are comparing Stock A to Stock B. Given the following information, what is the difference in the expected returns of these two securities?
State of Economy | Probability of State of Economy | Rate of Return if State Occurs | |
Stock A | Stock B | ||
Normal | 45% | 12% | 17% |
Recession | 55% | -22 | -31 |
-0.85 percent |
2.70 percent |
3.05 percent |
13.45 percent |
13.55 percent |
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