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: Aaron owns a two-stoek portfolio that invests in Happy Dog Soap Company (HDS) and Black Sheep Broadcasting (BSB). Three-quarters of Aaron's portfolio value consists of HOS's shares, and the bolance consists of BSB'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 detalled in the following table: Calculate expected returns for the individual stocks in Aaron's porfolio as well as the expected rote of return of the entire portfolio over the three possible market conditions neat year. - The expected rate of retum on Happy Dog Soap's stock over the next year is - The expected rate of return on Biack 5teee Broadcasting's stock over the next vear is - The expected rate of retum on Aaren's portfolis over the next year is The expected returns for Aaron's portfolio were calculated based on three possible conditions in the market. Such conditions 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 probability distributions of rates of return on stocks for two different companies are shown on the following graph: Based on the graph's information, which of the following statements is true? Coenpany A has lower riski Corncany 8 has lower risk