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You are considering an investment costing $10,000, for which the future cash flows from owning the security depend on the state of the economy as
You are considering an investment costing $10,000, for which the future cash flows from owning the security depend on the state of the economy as estimated in this table. In any given year the investment could produce any one of three possible cash flows, depending on the particular state of the economy. % Return State of the economy Probability of the states Cash flow from the investment $1,400 14% 25% Economic Recession $1,700 17% 35% Moderate Economic Growth 20% $2000 55% Strong Economic Growth Requirements: By following above information calculate - a-Expected cash flow b- Expected rate of return C- The standard deviation of the returns
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