Question

Felix is estimating the return for Togo Sledding and has determined the following probabilities and expected returns. Togo's expected return is closest to:

Answer 1

4.38%

Step-by-step explanation:

The computation of the expected return is shown below:

Expected returns is

= Sum of probability × Expected rate of return

= 9% × 17% + 11% × 14% + 15% × 8% + 42% × 3%+ 23% × -5%

= 0.0153 + 0.0154 + 0.012 + 0.0126 - 0.0115

= 4.38%

We simply applied the above formula and the same is to be considered

Hence, the expected return is 4.38%