Expected return on Barbara's investment
Question # 00008682
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Updated on: 02/19/2014 12:25 AM Due on: 02/19/2014
Barbara is considering investing in a stock and is aware that the return on that investment is particularly sensitive to how the economy is performing. Her analysis suggests that four states of the economy can affect the return on the investment. Using the table of returns and probabilities below, find
Probability Return
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Boom 0.2 25.00%
Good 0.6 15.00%
Level 0.1 10.00%
Slump 0.1 -5.00%
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What is the expected return on Barbara's investment?
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Rating:
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Solution: Expected return on Barbara's investment