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(Use the following data to answer the next two questions.) Rate of Return if State Occurs...

(Use the following data to answer the next two questions.)

Rate of Return if State Occurs

  State of Economy

Probability of State of Economy

Stock A

Stock B

  Recession

0.20

0.06

-0.19

  Normal

0.50

0.08

0.16

  Boom

0.30

0.16

0.34

9. Compute the expected return on each asset.

10. Compute the standard deviation of the return on each asset. Which is riskier?

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