Question

NFLXZ historical returns are −0.01,−0.01 and -0.01 . What is the expected return? Type your answer as decimal (i.e. 0.052 and not 5.2% ). Round your answer to the nearest four decimals if needed.

Answer 1

The expected return for the NFLXZ investment, given three historical returns of -0.01, is -0.01, or -1% when expressed in decimal form.

Step-by-step explanation:

The student has provided historical returns for an investment, specifically NFLXZ, which are –-0.01 for three different time periods. The expected return is a measure of the center of the distribution of possible returns, and hence can be calculated by finding the average return when the returns are symmetric and consistent, as they are in this case.

To calculate the expected return, you would sum the historical returns and divide by the number of returns to find the average:

Expected Return = (Sum of the returns) / (Number of returns) = (-0.01 + -0.01 + -0.01) / 3 = -0.03 / 3 = -0.01

This means that the expected return for the NFLXZ investment, given the historical data provided, is -0.01 or -1% when expressed as a decimal.