You are a manager and are asked to give your owners an expected return for the year.

You consider three possible scenarios and the probability of those outcomes as follows:

Event: Expected rate or return: Probability:

Booming economy 15% 40%

Stable economy 10% 40%

Recession -15% 20%

1. What is your expected return for this year?

2. If your investors required rate of return is 12%, will they be satisfied with this years return?