Dothan Inc.'s stock has a 25% chance of producing a 36% return,a 50% chance of producing a 12% return,and a 25% chance of producing a -18% return.What is the firm's expected rate of return? Do not round your intermediate calculations.
A) 9.35%
B) 10.50%
C) 10.40%
D) 9.14%
E) 11.76%

Question

Quizplus · Accepted Answer

The expected rate of return is calculated by multiplying each possible return by its probability and summing the results: (0.25 * 36%) + (0.50 * 12%) + (0.25 * -18%) = 9% + 6% - 4.5% = 10.50%.