Computing expected return and standard deviation of return


Q1) Kate newly invested in real estate with intention of selling property one year from today. She has modeled returns on investment based on three economics scenarios. She thinks that if economy remains healty, then her investment will create a 30 percent retuen. Though, if economy softens, as forecasted, return will be 10 percent, while return will be - 25 percent if economy slips into a recession. If probabilities of healthy, soft, and recessionary states are 0.4,0.5, and 0.1, respectively, then what are expected return and standard deviation of return on Kate's investment?

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Accounting Basics: Computing expected return and standard deviation of return
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