1. calculate the expected returns for the following ... Your question has been a

Question

1. calculate the expected returns for the following ... Your question has been answered! Rate it below. Let us know if you got a helpful answer. . Question 1. Calculate the expected returns for the following two assets: Asset A pays a return of $2,500 20% of the time and $750.80% of the time. Asset B pays a return of $2,000 40% of the and $600 60% of the time. The expected return for Asset A is $____ (Round your response to the nearest dollar)

2. A one-year discount bond for which the owner pays $937, holds it for the entire one year, and receives $1,000 at maturity, generates an interest rate of ____%.

(Round your response to the nearest one decimal place).

Explanation / Answer

1)Return on asset a=.2×2500+.8×750=1100

Return on asset b=2000×.4+600×.6=1160

2)PV=937

FV=1000

T=1

R=?

FV=PV×(1+R)^T

1000=937×(1+R)^1

SOLVING THE SAME LEADS TO

R=.0672

OR 6.72%

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