Example

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 pr babity of aboom economy is 13%, the robabity of a stable growth economy is 20% the probability of a stagnant economy is 47%, and the pot ablity of a recession is 20%. Estimate the expected returns on the following individual investments for the coming year Forecasted Returns for Each Economy Stable Boom 29% 9% 8% Stock Corporate bond 12% 7% 6% 7% 5% 4% -13% 4% 3%