Compute the expected return given these three economic states, their likelihoods

Question

Compute the expected return given these three economic states, their likelihoods, and the potential returns: (Round your answer to 2 decimal places.) Economic State Probability Return Fast growth 0.31 48 % Slow growth 0.53 17 Recession 0.16 –31 Compute the expected return given these three economic states, their likelihoods, and the potential returns: (Round your answer to 2 decimal places.) Economic State Probability Return Fast growth 0.31 48 % Slow growth 0.53 17 Recession 0.16 –31 Compute the expected return given these three economic states, their likelihoods, and the potential returns: (Round your answer to 2 decimal places.) Economic State Probability Return Fast growth 0.31 48 % Slow growth 0.53 17 Recession 0.16 –31

Explanation / Answer

Expected return : Return *% of probability

           = [48*.31]+[17*.53]+[-31*.16]

           = 14.88+ 9.01- 4.96

              = 18.93%

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