Use the following information to calculate your company's expected return. $\begin{array}{lll}
\text { State } & \text { Probability } & \text { Return } \
\hline \text { Boom } & 20 \% & 40 \% \
\text { Normal } & 60 \% & 15 \% \
\text { Recession } & 20 \% & (20 \%)
\end{array}$
A) 11%
B) 13%
C) 15%
D) 17%

Question

Quizplus · Accepted Answer

The expected return is calculated by multiplying each state's return by its probability and summing the results: (0.2 * 0.4) + (0.6 * 0.15) + (0.2 * -0.2) = 0.08 + 0.09 - 0.04 = 0.13 or 13%.

Use the Following Information to Calculate Your Company's Expected Return