Andre is considering an investment in Bristol Inc.and has gathered the following information.What is the expected return for a share of the firm's stock?
A)45.00%
B)65.00%
C)16.50%
D)15.00%

Question

Andre is considering an investment in Bristol Inc.and has gathered the following information.What is the expected return for a share of the firm's stock? 
A)45.00% 
B)65.00% 
C)16.50% 
D)15.00%

Quizplus · Accepted Answer

The expected return for a share of Bristol Inc.'s stock is 16.50%. This can be calculated by taking the weighted average of the expected returns for the three possible scenarios, which are: 20% chance of a 20% return, 50% chance of a 15% return, and 30% chance of a 10% return.

Option A (45.00%) and Option B (65.00%) are both significantly higher than the expected return, so they can be ruled out. Option D (15.00%) is close to the expected return, but not quite accurate, so it is also ruled out. Therefore, the best choice is C (16.50%).

Andre Is Considering an Investment in Bristol Inc