Question

Question 1: An investment has the following possible outcomes: State of the Economy Probability Return rapid...

Question 1: An investment has the following possible outcomes:

State of the Economy

Probability

Return

rapid growth

0.05

100%

Modest growth

0.45

56 %

Continued recession

0.45

78 %,

Falls into depression

0.05

-100%
  1. What is your estimate of the expected rate of returns from this investment opportunity?
  2. Would you be interested in making such an investment? Why?
  3. What is the standard deviation in the anticipated returns?
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