State of Economy Probability of State of Economy Rate of Ret

State of Economy

Probability of State of Economy

Rate of Return if State Occurs

Recession

0.21

-0.09

Normal

0.65

0.14

Boom

0.14

0.26

Calculate the expected return.

State of Economy	Probability of State of Economy	Rate of Return if State Occurs
Recession	0.21	-0.09
Normal	0.65	0.14
Boom	0.14	0.26

expected return of the distribution = 0.21 * -0.09 + 0.65 * 0.14 + 0.14*0.26

expected return of the distribution = 0.1085