Suppose that you have invested a large sum of Investopedia $ into natural gas, which is...

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Suppose that you have invested a large sum of Investopedia $ into natural gas, which is used by a large percentage of homes for heating.

The returns on your position will depend upon the weather as given in the following table:

State Probability Return

Severe cold 0.175 0.4

Normal weather 0.7 0

Severe heat 0.125 -0.4

What is the expected return on your natural gas position?

What is the volatility of the natural gas returns?

4. Suppose that you have invested a large sum of Investopedia $ into natural gas, which is used by a large percentage of homes for heating. The returns on your position will depend upon the weather as given in the following table: State Severe cold 0.175 0.4 Normal weather 0.7 Severe heat 0.125 a. What is the expected return on your natural gas position? Probability Return -0.4

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