Alternative Method

kp = (3.0%)0.10 + (6.4%)0.20 + (10.0%)0.40

+ (12.5%)0.20 + (15.0%)0.10 = 9.6%.

^

Estimated Return

Economy

Prob.

HT

Coll.

Port.

Recession 0.10 -22.0% 28.0% 3.0%

Below avg. 0.20 -2.0 14.7 6.4

Average 0.40 20.0 0.0 10.0

Above avg. 0.20 35.0 -10.0 12.5

Boom 0.10 50.0 -20.0 15.0

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