Respuesta :
Expected[Returns]=0.0745
What is Recession?
A recession is a recession in which there is a general decline in economic activity. A recession generally occurs when spending is widespread.
What is Booming Economy?
Booming economy are often brief periods of rapid real GDP growth leading to lower unemployment, faster inflation, and higher asset prices.
Solution:
Given in the question,
(Note: To convert percentage to decimal divide it by 100.)
Recession=will loose 6%, converting to decimal=0.06
Normal Economy=will earn 8%, converting to decimal=0.08
Booming Economy=will earn 15%, converting to decimal=0.15
Probability of Recession=45%, converting to decimal=0.45
Probability of Normal economy=50%, converting to decimal=0.5
Probability of Booming Economy=5%, converting to decimal=0.05
Now to calculate the expected return we will use the following Formula
Multiplying elements in with their respected phase of market we get,
Expected[Returns]=(0.06x0.45)+(0.08x0.5)+(0.15x0.05)
Expected[Returns]=0.0745
Hence, the return E[R] is 0.0745
To learn more about economics visit the following link
https://brainly.com/question/14787713
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