Asset Management
Lecture 1 1

Quiz 1
Consider the following probability
distribution for stocks A and B:
1 . The expected rates of return of stocks A and B are
E(RA) = 0.1 (1 0%) + 0.2(1 3%) + 0.2(1 2%) + 0.3(1 4%) + 0.2(1 5%) = 1 3.2%;
E(RB) = 0.1 (8%) + 0.2(7%) + 0.2(6%) + 0.3(9%) + 0.2(8%) = 7.7%.