Author Question: If General Motors expects profits of $50 million in a booming economy, what is the expected profit ... (Read 76 times)

krzymel · **on:** Apr 25, 2021

Question 1

Given the following probability distributions, what are the expected returns for the Market and for Security J? State 1 P1 = 0.2 Km = -10% Kj = 40% : State 2 P1 = 0.5 Km = 10% Kj = -20% : State 3 P1 = 0.3 Km = 30% Kj = 30%
◦ 10.0%; 13.0%
◦ 9.5%; 13.0%
◦ 10.0%; 11.3%
◦ 12.0%; 7.0%
◦ 10.0%; 9.5%

Question 2

If General Motors expects profits of $50 million in a booming economy, what is the expected profit during a recession if this is the only other possibility and the overall expected profit is $35 million? The probability of a recession is 70%.
◦ $35.00 million
◦ $25.00 million
◦ $23.45 million
◦ $39.50 million
◦ $28.57 million

juwms · **Reply #1 on:** Apr 25, 2021

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