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State of Economy Probability of State of Economy Security Returns if State Occurs (Roll) Security Returns if State Occurs (Ross) -10% 28% 21% 18%
State of Economy Probability of State of Economy Security Returns if State Occurs (Roll) Security Returns if State Occurs (Ross) -10% 28% 21% 18% Bust Boom 0.40 0.60 Use the above information on states of the economy and stock returns to calculate the expected returns for Ross by filling in the following table (verify your answer by expressing returns as percentages as well as decimals): Roll Ross (1) State of (2) (3) Economy Probability of Return if (4) Product (5) Return if (6) Product State (2) (3) State of Occurs State Occurs (2) (5) Economy Bust Boom E(RRoll) = For the toolbar, press ALT+F10 (PC) or ALT+FN+F10 (Mac). E(RRoss) =
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