Given the following probability distribution,calculate the expected return of security XYZ.
Security XYZ's
Potential returnProbability
20%0.3
30%0.2
-40%0.1
50%0.1
10%0.3
A)16 percent
B)22 percent
C)25 percent
D)18 percent

Question

Quizplus · Accepted Answer

The expected return is calculated by multiplying each potential return by its probability and summing the results: (0.3 * 20%) + (0.2 * 30%) + (0.1 * -40%) + (0.1 * 50%) + (0.3 * 10%) = 16%.

Given the Following Probability Distribution,calculate the Expected Return of Security