Economic Scenarios
Not what you're looking for?
Financial analysts believe that there are four equally likely states of the economy: depression, recession, normal, and boom times. The returns on the Supertech Company are expected to follow the economy closely, while the returns on the Slowpoke Company are not. The return predictions are as follows:
Supertech Returns Slowpoke Returns
Depression -20% 5%
Recession 10% 15%
Normal 25% 13%
Boom 45% 9%
Calculate the expected return for each company
Based on the data above, calculate the variance
Purchase this Solution
Solution Summary
This solution calculates the expected returns and variances for two companies based on four economic scenarios.
Solution Preview
Since each state is equally likely the weight for each state is 1/4 = 0.25.
Expected return for Supertech: 0.25 * -20% + 0.25 * 10% + 0.25 * 25% + 0.25 * 45% = -5% + 2.5% + 6.25% + ...
Purchase this Solution
Free BrainMass Quizzes
Operations Management
This quiz tests a student's knowledge about Operations Management
Business Processes
This quiz is intended to help business students better understand business processes, including those related to manufacturing and marketing. The questions focus on terms used to describe business processes and marketing activities.
Balance Sheet
The Fundamental Classified Balance Sheet. What to know to make it easy.
SWOT
This quiz will test your understanding of the SWOT analysis, including terms, concepts, uses, advantages, and process.
Understanding the Accounting Equation
These 10 questions help a new student of accounting to understand the basic premise of accounting and how it is applied to the business world.