Compute the expected return given these three economic states, their likelihoods, and the potential returns: Fast Growth State has a probability of 0.3 and 40% return. Slow Growth State has a probability of 0.4 and 15% return. Recession State has a probability of 0.3 and -15% return.
|
7.1% |
| 13.50% |
| 21.34% |
| 38.95% |