Remember, the expected value of a probability distribution is a statistical measure of the average (mean) value expected to occur during all possible circumstances. To compute an moet's expected retum under a range of possible circumstances for states of nature), multiply the anticipated retum expected to result during each state of nature by its probability of occurrence Consider the following case: Raphael owns a two-stock portfolio that invest in Falcon Freight Company (FF) and Pheasant Pharmaceuticals (PP). Three-quarters of Aaphael portfolio value consists of Palcon Freight's shares, and the balance consists of Pheasant Pharmaceuticals' shares Each stock' expected return for the next year will depend on forecasted market conditions. The expected returns from the stocks in different market conditions are detailed in the following table: Market Condition FF Probability of Occurrence 20% 35% 45% PP 28% Strong Normal Weak 20% 12% 16% -20% Calculate expected returns for the individual stocks in Raphael's portfolio as well as the expected rate of return of the entire portfolie over the three possible market conditions next year. The expected rate of return on Raicon Freight's stock over the next year is . The expected rate of return on Pheasant Pharmaceuticals's stock over the next year is The expected rate of return on Raphael's portfolio over the next year is Company PROBABILITY DENSITY Company 5 30 50 40 50 50 10 20 30 RATE OF RETURN (Peroen ci Based on the graph's Information, which of the following statements is true? Company A has lower risk. Company B has lower risk