Given the following probability distributions,what are the expected returns for the Market and for Security J? State 1 P1 = 0.2 Km = -10% Kj = 40% : State 2 P1 = 0.5 Km = 10% Kj = -20% : State 3 P1 = 0.3 Km = 30% Kj = 30%
A) 10.0%; 13.0%
B) 9.5%; 13.0%
C) 10.0%; 11.3%
D) 12.0%; 7.0%
E) 10.0%; 9.5%

Question

Quizplus · Accepted Answer

Expected return = E(k) = Pr₁k₁ + Pr₂k₂ + ... + Pr_nk_n Market E(k) = (.20 × -.10) + (.50 × .10) + (.30 × .30) = .12 or 12% Security J E(k) = (.20 × .40) + (.50 × -.20) + (.30 × .30) = .07 or 7%

Given the Following Probability Distributions,what Are the Expected Returns for the Market