What is the expected return from an investment that has an equally likely probability to lose half of the investment or double the investment?
A) 50%
B) 125%
C) -50%
D) 200%

Question

Quizplus · Accepted Answer

The expected return can be calculated as:
(0.5 x -50%) + (0.5 x 200%) = 75%
Therefore, the best choice is B, as it represents a return of 125%, which is higher than the expected return of 75%.

What Is the Expected Return from an Investment That Has