Question: Based on the following information, calculate the expected return. State of Economy Probability of State of Economy Rate of Return if State Occurs Recession 0.25

Based on the following information, calculate the expected return.

State of Economy Probability of State of Economy Rate of Return if State Occurs Recession 0.25 -0.09 Boom 0.75 0.21

Based on the following information, calculate the expected return.

State of Economy Probability of State of Economy Rate of Return if State Occurs Recession 0.25 -0.09 Normal 0.45 0.12 Boom 0.30 0.30 (5 marks)

Based on the following information, calculate the expected return and standard deviation for the 2 stocks.

State of Economy Probability of State of Economy Rate of Return if State Occurs Stock A Stock B Recession 0.20 0.01 -0.25 Normal 0.55 0.09 0.15 Boom 0.25 0.14 0.38

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