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elena-14-01-66 [18.8K]
3 years ago
7

You are given the following probability distribution of returns for stock IN A probability of 2 that the return will be 12 a pro

bability of 35 that the return will be 18 a probability of 3 that the return will be 10 and a probability of 15 that the return will be 10 What is the expected return of this stock
Business
1 answer:
12345 [234]3 years ago
7 0

Correct Question

You are given the following probability distribution of returns for stock IN A probability of 0.2 that the return will be 12 a probability of 0.35 that the return will be 18 a probability of 0.3 that the return will be 10 and a probability of 0.15 that the return will be 10 What is the expected return of this stock

Answer:

expected return of this stock =  13.2%

Explanation:

<em>The expected rate of return is the weighted average of all the possible returns associated with an investment decision. The returns are weighted using the probability associated with their outcomes.</em>

Expected return = WaRa + Wb+Rb + Wn+Rn

W- weight of the outcome, R - return of the outcome

=(0.2× 12%) + (0.35× 18%) + (0.30×10%) + (0.15 × 10%)

=  13.2%

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