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What is the expected return

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Question - Returns on assets X and Y are functions of the state of the economy: State of the economy Probability of occurrence for the state Possible Rates of Returns X Y Boom 0.20 15% 20% Normal 0.50 12% 14% Slowdown 0.20 10% 8% Recession 0.10 8% 4%.

Required -

(a) What is the expected return (?X) and risk (σX) of Asset X?

(b) What is the expected return (?Y) and risk (σY) of Asset Y?

(c) Which asset is riskier? Why?

Reference no: EM132620545

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