Publicité

# Problem 11-6 Calculating Expected Return [LO 1]Calculate the expec.pdf

ajantaopt
26 Mar 2023
Prochain SlideShare
Problem 17-2Complete the following tableInstructions Enter y.pdf
Chargement dans ... 3
1 sur 2
Publicité

### Problem 11-6 Calculating Expected Return [LO 1]Calculate the expec.pdf

1. Problem 11-6 Calculating Expected Return [LO 1] Calculate the expected return. (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)Consider the following information: Solution The above problem states : State of Economy Recession Probability of State of Economy .18 Rate of Return if State Occurs –.11 Normal .47 .13 Boom .35 .32 Formulae of Exp return = Prob of occurence * return on occurence Therefore the cumulative expected return = (Prob of Recession * return on Recession) + (Prob of Normal * return on Normal) + (Prob of Boom * return on Boom) Exp Return = (0.18 * -0.11) + (0.47 * 0.13) + (0.35 * 0.32) = - 0.0198 + 0.0611 + 0.112 = 0.1533 = 15.33% State of Economy Recession Probability of State of Economy .18 Rate of Return
2. if State Occurs –.11 Normal .47 .13 Boom .35 .32
Publicité