Compute the Expected Return Given These Three Economic States, Their

question 89

Multiple Choice

Compute the expected return given these three economic states, their likelihoods, and the potential returns: $$\begin{array} { | l | c | r | } \hline \begin{array} { l } \text { Economic } \\\text { State }\end{array} & \text { Probability } & \text { Return } \\\hline \text { Fast Growth } & 0.3 & 40 \% \\\hline \text { Slow Growth } & 0.4 & 15 \% \\\hline \text { Recession } & 0.3 & - 15 \% \\\hline\end{array}$$

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

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Definitions:

Insurance Contract

A legally binding agreement between an insurer and the insured, outlining the terms for premium payment and the conditions under which the insurer will compensate the insured.

Goods

Tangible, movable personal property that can be measured and weighed; also known as chattels.

Non Est Factum

A plea asserting that an agreement is void because the signer was unaware of its essence due to deception or misunderstanding.

Illegality of Object

Refers to a principle in contract law that prohibits the enforcement of agreements that involve an illegal purpose or object.