Problems to work through 1. 2. Considering a scenario of probable returns, describe Expected Return What is the expected rate of retur? Probability Estimated Scenario (%) HPR (%) Recession 0.10 -20.0 Normal growth 8.0 Boom 0.60 0.30 30.0 3. What is the variance and standard deviation from the scenarios above? What do they tell us? 4. Given the picture below, how would you characterize a return of 35%? What is a tail risk? 68 26% 95.44% 99,74% 40 -70 -30 50 --20 -30 +20 -10 0 +10 -10 10 30 Rate of return (%) 50 30 70 -40 90