Question

ABC Inc.'s stock has a 40% chance of producing a 8.6% return, a 25% chance of producing a 11.2% return, and a 35% chance of producing a 21.7% return. What is ABC Inc's expected return?

Answer 1

13.835%

Step-by-step explanation:

The computation of the expected return is shown below:

Expected rate of return = (Probability chance 1 × produced return 1) + (Probability chance 2 × produced Returns 2) + (Probability chance 3 × Returns 3)

= (0.40 × 0.086) + (0.25 × 0.112) + (0.35 × 0.217)

= 3.44% + 2.8% + 7.595%

= 13.835%

Simply we multiplied the produced return with the probability so that the expected rate of return can arrive