Question

Annual Return...Probability

15% ...0.2
20%...0.4
30% ...0.3
35% ...0.1
The table gives the probability distribution of the annual rate of return on the stock of MNP Company, Inc.

The expected value of the rate of return is ______%.

Answer 1

Calculation:
15%*0.2 + 20%*0.4 + 30%*0.3 + 35%*0.1 = 23.5%

Answer:
The expected value of the rate of return is 23.5%

Answer 2

Answer: The expected value of the rate of return is 23.5%.

Explanation:

Since we have given that

Annual Return Probability

15% 0.2

20% 0.4

30% 0.3

35% 0.1

We need to find the expected value of the rate of return:

As we know the formula for "Expected value ":
`E(x)=\sum xp(x)`

So, it becomes,

`E(X)=15* 0.2+20* 0.4+30* 0.3+35* 0.1=23.5\%`

Hence, the expected value of the rate of return is 23.5%.