You are evaluating two securities under two possible economic scenarios, boom (expansion) and bust (recession). You are unsure of which scenario will occur, so you assign a 50% probability that either scenario will occur.

You also expect the following returns:

BOOM BUST

Stock A 15% -5%

Stock B 0% 10%

What are the expected returns for each security?

What is the standard deviation of return for each security?

Which offers a better reward to risk ratio?

Is it possible to observe these reward-to-risk ratios in the market? Why or why not?