Question

Consider the following information:

State of Economy Probability of State of Economy Rate of Return if State Occurs Recession

State of Economy	Probability of State of Economy	Rate of Return if State Occurs
Recession	.42	−	.11
Boom	.58		.23

Calculate the expected return. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
  
Expected return_______ %

Answer 1

expected return=Respective return*Respective probability

=(0.42*-11)+(0.58*23)

which is equal to

=8.72%