A project has a 50% chance of doubling your investment in one year and a 50% chance of losing half your money.What is the expected return on this investment project?
A) 0%
B) 25%
C) 50%
D) 75%

Question

Quizplus · Accepted Answer

To calculate the expected return, we take the weighted average of the possible returns. 
The expected return can be calculated as: 
Expected return = (0.5 x 100%) + (0.5 x (-50%)) = 25%
Therefore, the best choice is B, which represents an expected return of 25%.

A Project Has a 50% Chance of Doubling Your Investment