Answer:
Both the stock have the same expected return.
Step-by-step explanation:
In year 1 the return earned by stocks A and B are:
Stock A = 2% return
Stock B = 9% return
In year 2 the return earned by stocks A and B are:
Stock A = 18% return
Stock B = 11% return
Compute the expected return for stock A as follows:
[tex]Expected\ return\ for\ A=\frac{2+18}{2}=10\%[/tex]
Compute the expected return for stock B as follows:
[tex]Expected\ return\ for\ B=\frac{9+11}{2}=10\%[/tex]
Thus, both the stock have the same expected return.