Compute the expected return given these three economic states, their likelihoods, and the potential returns: Economic State
Probability
Return
Fast Growth
0)3
40%
Slow Growth
0)4
15%
Recession
0)3
-15%
A)13.5 percent
B)22.5 percent
C)18.3 percent
D)40.0 percent

Question

Quizplus · Accepted Answer

The expected return is calculated by multiplying each state's return by its probability and summing the results: (0.3 * 40%) + (0.4 * 15%) + (0.3 * -15%) = 12% + 6% - 4.5% = 13.5%.

Compute the Expected Return Given These Three Economic States, Their