Based on the following information, what is the expected
return?
| State of | Probability of State | Rate of Return if | ||
| Economy | of Economy | State Occurs | ||
| Recession | .30 | − | 9.80% | |
| Normal | .39 | 11.30% | ||
| Boom | .31 | 21.40% | ||
Multiple Choice
11.04%
13.98%
7.63%
8.10%
7.87%
Expected return=Respective return*Respective probability
=(0.3*-9.8)+(0.39*11.3)+(0.31*21.4)
which is equal to
=8.10%(Approx).
Based on the following information, what is the expected return? State of Probability of State Rate...
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