1. Statistical measures of standalone risk Remember, the expected value of a probability distribution is a statistical measure of the average (mean) value expected to occur during all possible circumstances. To compute an asset's expected return under a range of possible circumstances (or states of nature), multiply the anticipated return expected to result during each state of nature by its probability of occurrence. Consider the following case: Dominic owns a two-stock portfolio that invests in Celestial Crane Cosmetics Company (CCC) and Lumbering Ox Truckmakers (LOT). Three-quarters of Dominic's portfolio value consists of CCC's shares, and the balance consists of LOT's shares Each stock's expected return for the next year will depend on forecasted market conditions. The expected returns from the stocks in different market conditions are detailed in the following table: Market Condition Probability of Occurrence Celestial Crane Cosmetics Lumbering ox Truckmakers Strong Normal Weak 25% 45% 30% 4590 27% 3690 63% 36% 45% Calculate expected returns for the individual stocks in Dominic's portfolio as well as the expected rate of return of the entire portfolio over the three possible market conditions next year