Consider the following information: Calculate the expected return. ( Do not roun

Question

Consider the following information:

Calculate the expected return. (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

Expected return:

Consider the following information:

State of
Economy Probability of State
of Economy Rate of Return
if State Occurs   Recession .21             –.13             Normal .49             .15             Boom .30             .34           Required:

Calculate the expected return. (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

Expected return:

Explanation / Answer

Expected return= sum of (Probability of State of Economy i * Rate of Return if State Occurs i) i= recession,normal,boom

= 0.21*(-.13)+0.49*.15*0.3*.34

=0.1482

Expected return= 14.82%

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