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 outcomes
D)is the median value of the probability distribution of possible outcomes
E)is the mode value of the probability distribution of possible outcomes

Question

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 outcomes
D)is the median value of the probability distribution of possible outcomes
E)is the mode value of the probability distribution of possible outcomes

Quizplus · Accepted Answer

The expected rate of return is the weighted average of all possible returns, where the weights are the probabilities of each return occurring. It is therefore the mean value of the probability distribution of possible outcomes.

The Expected Rate of Return of an Investment _____