Compute the expected return given these three economic states, their likelihoods, and the potential returns: Economic State
Probability
Return
Fast Growth
0)1
50%
Slow Growth
0)6
8%
Recession
0)3
-10%
A)6.8 percent
B)12.8 percent
C)16.0 percent
D)22.7 percent

Question

Quizplus · Accepted Answer

The expected return is calculated as the sum of the products of the probabilities and returns for each economic state. In this case, the expected return is:(0.1 * 50%) + (0.6 * 8%) + (0.3 * -10%) = 6.8%

Compute the Expected Return Given These Three Economic States, Their