The expected rate of return of an investment _____.
A) equals one of the possible rates of return for that investment
B) equals the required rate of return for the investment
C) is the mean value of the probability distribution of possible returns
D) is the median value of the probability distribution of possible returns
E) is the mode value of the probability distribution of possible returns

Question

Quizplus · Accepted Answer

The expected rate of return of an investment is the mean value of the probability distribution of possible returns. It is calculated by multiplying each possible return by its probability of occurrence and then adding all the results together.

The Expected Rate of Return of an Investment _____