What is expected return and standard deviation of the return

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Reference no: EM131576154

Pamela recently invested in real estate with the intention of selling the property one year from today. She has modeled the returns on that investment based on three economic scenarios. She believes if the economy stays healthy, then her investment will generate a 30% return; however, if the economy softens her predicted return will be 10%. The return will be -25% if the economy slips into a recession. If the probabilities of a health, soft, and recessionary state are 40%, 50%, and 10%, respectively, what is the expected return AND standard deviation of the return on Pamela’s investment?

Reference no: EM131576154

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