Question: Problem 10-21 Spreadsheet Problem (LG10-3) The expected market return and risk for different assumptions about the state of the economy is shown below. State of

Problem 10-21 Spreadsheet Problem (LG10-3)

The expected market return and risk for different assumptions about the state of the economy is shown below.

State of Economy Probability of State Expected Market Return
Fast growth 0.14 29%
Slow growth 0.38 11%
No growth 0.28 2%
Recession 0.17 12%
Depression 0.03 30%

Compute the expected return and standard deviation.

Note: Round your answers to 2 decimal places.

Compute the expected return and risk for the following 2 scenarios:

Note: Round your answers to 2 decimal places.

Scenario 1:

State of Economy Probability of State Expected Market Return
Fast growth 0.09 39%
Slow growth 0.43 15%
No growth 0.28 6%
Recession 0.19 17%
Depression 0.01 32%

Scenario 2:

State of Economy Probability of State Expected Market Return
Fast growth 0.10 45%
Slow growth 0.40 18%
No growth 0.34 6%
Recession 0.13 16%
Depression 0.03 36%

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