If the required return from an asset is 10%,and the asset has a 60% probability of yielding a 20% return and a 40% probability of earning a 5% return,you should:
A) Not acquire the asset since the expected return of 32% exceeds the required return.
B) Purchase the asset since the expected return of 14% exceeds the required return.
C) Buy the asset because the expected return of 32% exceeds the required return.
D) Forgo the investment opportunity since the expected return of 14% is too low.
E) Buy the asset because the expected return of 12.5% exceeds the required return.

Question

Quizplus · Accepted Answer

Expected return = E(k) = Pr₁k₁ + Pr₂k₂ + ... + Pr_nk_n Expected return = (.60 × .20) + (.40 × .05) = .14 or 14%

If the Required Return from an Asset Is 10%,and the Asset