The option (3) is right option.
Explanation:
Economic state | Probability | return | probability*return | |
A | 35% | 20% | 7.00% | |
B | 15% | 35% | 5.25% | |
C | 25% | 6% | 1.50% | |
D | 25% | 12% | 3.00% | |
expected return =sum of (probability*return) | 16.75% | |||
Options is 3 | 16.75% |
Hence, option "3" is right option.
The option 3 is right option.