State of Economy Bust Boom Probability of State of Economy .30 .70 Security Returns if State Occurs Roll -16% 15 Ross 16% 6 Calculate the expected returns for Roll and Ross by filling in the following table: (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Calculate the product using the decimal value of the probability and the percentage value of the return. Input all your answers as a percent rounded to 2 decimal places.) Roll Ross Probability of State of Return if State of Product Economy State Occurs Return if State Occurs Product Economy Bust .30 -16.00 % % 16% % Boom .70 15% % 6% % E(R) = 5.70% E(R) = 9.00 %
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The probability of a bust is 0.30, and the return in a bust is -16%. The product is 0.30 * -0.16 = -0.048. Converting this to a percentage, we get -4.80%. Show more…
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Security Returns if State Occurs State of Economy Bust Boom Probability of State of Economy .50 .50 Roll -14% 31 Ross 14% 7 Calculate the expected returns for Roll and Ross by filling in the following table: (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Calculate the product using the decimal value of the probability and the percentage value of the return. Input all your answers as a percent rounded to 2 decimal places.) State of Economy Probability of State of Economy Roll Ross Return if State Occurs Product Return if State Occurs Product Bust .50 -14.00 % % 14 % % Boom .50 31% % 7% % E(R) = 8.50 % E(R) = 10.50 %
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