Compute the expected return given these three economic states, their likelihoods, and the potential returns: (Round...

Question

Question

Compute the expected return given these three economic states, their likelihoods, and the potential returns: (Round your answer to 1 decimal place.)

Economic State Probability Return

Fast Growth 0.3 40%

Slow Growth 0.4 10

Recession 0.3 -25

business finance

Answer 1

Answer #1

Expected Return=Respective Return*Respective probability

=(0.3*40)+(0.4*10)+(0.3*-25)

which is equal to

=8.5%

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Answer 2

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