Question

expected return. Hull consultants, a famous think tank in the midwest, has provided probability estimates for the four potential economic states for the coming year. the probability of a boom economy is 12%, the probability of a stable growth economy is 18%, the probability of a stagnant economy is 54% and the probability of a recession is 16%. Estimate the expected return on the following individual investments for the coming year.

investments, boom, stable , stagnant,     recession

stock.               20%      14%            5%             -14%
corporate b.     9%        8%             6%                 4%
government.    8%        7%             5%                 3%

hint: make sure to round all intermediate calculations to at least seven (7) decimal places.

Answer 1