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Nat2105 [25]
4 years ago
5

Considering the world economic outlook for the coming year and estimates of sales and earning for the pharmaceutical industry, y

ou expect the rate of return for Lauren Labs common stock to range between -20 percent and +40 percent with the following probabilities:Probability Possible Returns.10 -.20.15 -.05.20 .10.25 .15.20 .20.10 .40Compute the expected rate of return E(Ri) for Lauren Labs.
Business
1 answer:
ivanzaharov [21]4 years ago
7 0

Answer:

The expected rate of return E(Ri) for Lauren Labs is 16.5%

Explanation:

The formula to compute the expected rate of return is shown below:

Expected rate of return = (Probability 1 × Possible Returns 1) + (Probability 2 × Possible Returns 2) + (Probability 3 × Possible Returns 3) + (Probability 4 × Possible Returns 4) + (Probability 5 × Possible Returns 5) + (Probability 6 × Possible Returns 6)

= (0.10 × 0.20) + (0.15 × 0.05) + (0.20 × 0.10) + (0.25 × 0.15) + (0.20 × 0.20) + (0.10 × 0.40)

= 2% + 0.75% + 2% + 3.75% + 4% + 4%

= 16.5%

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Option "B" is the correct answer to the following statement.

Enlightened Self-interest School.

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8 0
3 years ago
One bag of flour is sold for $1.00 to a bakery, which uses the flour to bake bread that is sold for $3.00 to consumers. A second
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The correct answer is option b.

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