Compute the Expected Return Given These Three Economic States, Their

question 67

Multiple Choice

Compute the expected return given these three economic states, their likelihoods, and the potential returns:
$$\begin{array}{l}\begin{array} { c c r } \text { Eccrorric State }&\text { Probability } & \text { Return } \\\text { fast growth }&0.3 & 40 \% \\\text {slow growth }&0.4 & 15\% \\\text { recession }&0.3 & - 15\%\end{array}\end{array}$$

• A) 13.5 percent
• B) 22.5 percent
• C) 18.3 percent
• D) 40.0 percent

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Definitions:

Substitute Products

Products that can serve as replacements for each other; when the price of one increases, the demand for the substitute is likely to increase.

Price

The charge in currency projected, demanded, or provided in recompense for something.

Purchased Amount

The total volume or quantity of goods or services bought.

Normal Good

A good whose demand increases as consumers' income rises, holding all other factors constant.