ABC Inc.'s stock has a 30% chance of producing a 10% return, a 40% chance of...

ABC Inc.'s stock has a 30% chance of producing a 10% return, a 40% chance of

producing a 0% return, and a 30% chance of producing a -5% return. What is the firm's

expected rate of return?

Solutions

Expert Solution

Ans 1.50%

	Probability (P)	RETURN (Y)	(P * Y )
	30%	10	3.00
	40%	0	0.00
	30%	-5	-1.50
		TOTAL	1.50


Expected Return =		(P * Y)
		1.50%

jeff jeffy answered 2 years ago

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