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Suppose you have the following possible risky investments (A,B,C,D) and a risk free investment (RF) where the states have equal probability of occurring: Investment State
- Suppose you have the following possible risky investments (A,B,C,D) and a risk free investment (RF) where the states have equal probability of occurring:
Investment | State 1 | State 2 | State 3 | State 4 |
A | -3 | 1 | 5 | 5 |
B | 2 | 10 | 10 | -5 |
C | 3.75 | 2.25 | 1.75 | -0.75 |
D | 7 | 17 | -2 | -7 |
RF | 1 | 1 | 1 | 1 |
What is the expected return of investment A?
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