Question

The table gives the probability distribution of the annual rate of return on the stock of MNP Company, Inc. What is the expected value of the rate of return?

Annual Return
Probability

  15% 0.2 20% 0.4 30% 0.3 35% 0.1

Answer 1

Explanation:

Given is a table which gives the probability distribution of the annual rate of return on the stock of MNP Company, Inc. We have to find out the expected value of the rate of return

Let X be the return and p probability

Then

X 15% 20% 30% 35% Total

p 0.2 0.4 0.3 0.1 1

x*p 3 8 9 3.5 23.5

Hence Expected rate of return

=E(x)= 23.5%

Answer 2

For the answer to the question above,
The expected value in percentage format is 0.2 x 15+0.4 x 20 + 0.3 x 30 + 0.1*35 = 23.5%
The answer is 23.5%

I hope my answer helped you. Have a nice day ahead!