Use the following information,which describes the possible outcomes from investing in a particular asset,to answer the following question(s).

-What is the expected rate of return for an investment that has the following expected scenario? If there is an 18% probability of a recession,2.0% return;if there is a 65% probability of a moderate economy,9.5% return;if there is a 17% probability of a strong economy,14.2% return.
A)11.25%
B)7.33%
C)8.95%
D)9.59%

Question

Use the following information,which describes the possible outcomes from investing in a particular asset,to answer the following question(s).
 
-What is the expected rate of return for an investment that has the following expected scenario? If there is an 18% probability of a recession,2.0% return;if there is a 65% probability of a moderate economy,9.5% return;if there is a 17% probability of a strong economy,14.2% return.
A)11.25% 
B)7.33% 
C)8.95% 
D)9.59%

Quizplus · Accepted Answer

The expected rate of return is calculated by multiplying each scenario's return by its probability and summing the results: (0.18 * 2.0%) + (0.65 * 9.5%) + (0.17 * 14.2%) = 8.95%.

Use the Following Information,which Describes the Possible Outcomes from Investing