You are considering investing in a project with the following possible outcomes:
Calculate the expected rate of return for this investment.
A)9.8%
B)7.0%
C)8.3%
D)6.3%

Question

You are considering investing in a project with the following possible outcomes: 
Calculate the expected rate of return for this investment.
A)9.8% 
B)7.0% 
C)8.3% 
D)6.3%

Quizplus · Accepted Answer

To calculate the expected rate of return for this investment, we need to find the weighted average of the possible outcomes, where each outcome is multiplied by its respective probability.

Expected rate of return = (0.3 x 14%) + (0.4 x 8%) + (0.3 x 5%) = 4.2% + 3.2% + 1.5% = 8.9%

Therefore, the closest option to the expected rate of return is 8.3%, which is option C.

You Are Considering Investing in a Project with the Following