2. Statistical measures of stand-alone risk Remember, the expected value of a probability chistnbution is a statistical measure of the averoge (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 Blue Lama Mining Company (BLM) and Hungry Whale Electronics (HWE). Threequarters of Dominic's portfolio value consists of BLM's shares, and the balance consists of HWE'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: Calculate expected returnis 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 noxt year: - The expected rate of return on Blue Lama Mining's stock over the next year is - The expected rate of return on Hungry Whale Electronics's stock over the next year is - The expected rate of return on Dominic's portfolio over the next year is The expected returns for Dominic's portfolio were calculated based on three possible conditions in the market. Such conditionts will vary from time to time, and for each condition there will be a specific outcome. These probabilities and outcomes can be represented in the form of a continuous probability distribution graph. For example, the continuous probbbility distributions of rates of return on stocks for two different companies are shown on the following graph: The expected returns for Dominic's portfolio were calculated based on three possible conditions in the market. Such conditions will vary from time to time, and for each condtion there will be a specific outcome. These probabilities and outcomes can be represented in the form of a continuous probability distribution graph. For example, the continuous probsbility distributions of rates of return on stocks for two different companies are shown on the following graph: Based on the graph's information, which statement is folse? Company it has lower risk. Company G has lower risk