Compute the expected return given these three economic states, their likelihoods, and the potential returns: (Round...

Question

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: 0.29 30 %

Slow growth: 0.4 3

Recession: 0.30 –27

Answer 1

Answer #1

The formula for expected return is:

Expected return = p1 * r1 + p2 * r2 + p3 * r3

where, p1,p2 and p3 are the probabilities and r1,r2 and r3 are the returns for economic states.

Putting the given values of the probability in the above formula, we get,

Expected return = (0.29 * 30%) + (0.4 * 30%) + (0.3 * -27%)

Expected return = 8.7 + 12 - 8.1

Expected return = 12.6%

Answer 2

Similar Homework Help Questions

What is the expected return rate? Compute the expected return given these three economic states, their likelihoods, and...

What is the expected return rate? Compute the expected return given these three economic states, their likelihoods, and the potential returns: (Round your answer to 2 decimal places.) Return 30% Economic State Fast growth Slow growth Recession Probability 0.29 0.41 0.30 3 -27 Expected return
Compute the expected return given these three economic states, their likelihoods, and the potential returns: (Round...

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 0.26 60 % Slow growth 0.37 27 Recession 0.37 –39
Compute the expected return given these three economic states, their likelihoods, and the potential returns: (Round...

Compute the expected return given these three economic states, their likelihoods, and the potential returns: (Round your answer to 1 decimal place). Economic State Probability Return Fast growth 0.3 40 % Slow growth 0.4 10 Recession 0.3 –25

Compute the expected return given these three economic states, their likelihoods, and the potential returns: Economic...

Compute the expected return given these three economic states, their likelihoods, and the potential returns: Economic State Probability Return Fast growth 0.2 35 % Slow growth 0.6 10 Recession 0.2 –30
Expected Return Compute the expected return given these three economic states, their likelihoods, and the potential...

Expected Return Compute the expected return given these three economic states, their likelihoods, and the potential returns: Economic State Probability Return Fast Growth .3 31.5% Slow Growth .4 6.75% Recession .3 -2.75%
Following are three economic states, their likelihoods, and the potential returns: Economic State Probability Return Fast...

Following are three economic states, their likelihoods, and the potential returns: Economic State Probability Return Fast growth 0.24 30 % Slow growth 0.36 7 Recession 0.40 –19 Determine the standard deviation of the expected return. (Do not round intermediate calculations and round your answer to 2 decimal places.)

Compute the expected return of an asset given these three economic states, their likelihoods, and the...

Compute the expected return of an asset given these three economic states, their likelihoods, and the potential returns: Economic State Probability Return Fast Growth 20.00% 30.00% Slow Growth 50.00% 6.00% Recession 30.00% -2.00% 8.40% 11.33% 12.65% 15.47%
Following are three economic states, their likelihoods, and the potential returns: Probability Economic State Return Fast...

Following are three economic states, their likelihoods, and the potential returns: Probability Economic State Return Fast growth Slow growth 0.20 301 0.58 5 0.22 -35 Recession Determine the standard deviation of the expected return. (Do not round intermediate calculations and round your answer to 2 decimal places.) Standard deviation
Following are three economic states, their likelihoods, and the potential returns: Economic State Fast growth Slow...

Following are three economic states, their likelihoods, and the potential returns: Economic State Fast growth Slow growth Recession Probability 0.24 0.36 0.40 Return 36% 11 -28 Determine the standard deviation of the expected return. (Do not round intermediate decimal places.) Standard deviation

Following are four economic states, their likelihoods, and the potential returns. Economic States Probability Return Fast...

Following are four economic states, their likelihoods, and the potential returns. Economic States Probability Return Fast Growth 0.33 56% Slow Growth 0.42 15% Recession 0.15 -12% Depression 0.10 -42% Calculate the expected return and Standard Deviation (round answers to two decimal places.) PLEASE include the excel formulas for expected return and standard deviation. Thanks.