Compute the expected return for the following investment

State of nature Probability Return

Boom 25% 20%

Average 60% 8%

Recession 15% 0%

The following are the expected returns on a portfolio of investments. What is the expected rate of return on the portfolio?

Investment # of shares Price per share Expected return

A. 2000 $20 10%

B. 3000 $10 15%

C. 1000 $15 8%

You take out a $200,000 mortgage for 20 years at 6%.

What is your monthly payment?

What is the principle and interest on the first payment?

What is the principle and interest on the twelfth payment?

How much interest will you pay over the 20 years?