ch 02: Assignment- Risk and Return: Part I 4. Statistical measures of stand-alone risk Remember, the expected value of a probability distribution is a statistical measure of the average (mean) value expected to occur during all possible dircumstances. To compute an asset's expected return under a range of possible circumstances (or states of nature), multiply the anticipated retur expected to result during each state of nature by its probability of occurende Consider the following case: Dominic owns a two-stock portfolio that invests in Blue Liama Hining Company (BLM) and Hungry Whale Energy (HWE). Three-quarters of Domine's portfolio value consists of BLM's shares, and the balance consists of HWE's shares Each stock's expected return for the next year will depend on forecasted market conditions. The expected returns from the stocks in diferent market conditions are detailed in the following table: Market Condition Probability of Occurrence Blue Llama Mining Strong 35% 49% 21% Calculate expected returns for the individual stocks in Dominic's portfolio as well as the expected rate of return of the entire portfolio over the three possible market conditions next year . The expected rate of return on Blue Liama Mining's stock over the next year is The expected rate of returm on Hungry whale Energy's stock over the next year is The expected rate of retum on Dominic's portfolio over the next year is 80 4 2 0