Assume that the yield on a security has two possible outcomes. There is a 60 percent chance it will yield 10 percent and a 40 percent chance it will yield 5 percent. The expected yield for this security is
A) 10.0 percent.
B) 8.0 percent.
C) 7.5 percent.
D) 6.0 percent.

Question

Quizplus · Accepted Answer

The expected yield is calculated by multiplying each possible outcome by its probability and then summing these products. Thus, (0.60 * 10%) + (0.40 * 5%) = 6% + 2% = 8%.

Assume That the Yield on a Security Has Two Possible