A fruit company has 20% returns in periods of normal rainfall and -3% returns in droughts....

A fruit company has 20% returns in periods of normal rainfall and -3% returns in droughts. The probability of normal rainfall is 60% and droughts 40%. What would the fruit company’s expected returns be?

24%

10.8%

0

1.1 %

Expert Solution

Expected return=Respective return*Respective probability

=(0.6*20)+(0.4*-3)

which is equal to

=10.8%

jeff jeffy answered 2 years ago

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