An investment's average expected rate of return is the
A) probability-weighted average of the investment's possible future rates of return.
B) simple average of the investment's possible future rates of return.
C) probability-weighted average of all past rates of return.
D) simple average of the rates of return of all similar investments.

Question

Quizplus · Accepted Answer

The average expected rate of return is the probability-weighted average of the investment's possible future rates of return. This takes into account the likelihood of each possible rate of return occurring and provides a more accurate estimate of the investment's performance.

An Investment's Average Expected Rate of Return Is the