Suppose Microsoft stock will provide either a return of 10 or 20 percent over the next year and that the probability of the former outcome is 0.25 while the probability of the latter is 0.75.The expected return on Microsoft stock over the next year is thus _____%.
A)15
B)12.5
C)17.5
D)20

Question

Quizplus · Accepted Answer

The expected return is calculated as (0.25 * 10) + (0.75 * 20) = 2.5 + 15 = 17.5%.

Suppose Microsoft Stock Will Provide Either a Return of 10