Freedman Flowers' stock has a 50% chance of producing a 25% return,a 30% chance of producing a 10% return,and a 20% chance of producing a -28% return.What is the firm's expected rate of return?
A) 9.41%
B) 9.65%
C) 9.90%
D) 10.15%
E) 10.40%

Question

Quizplus · Accepted Answer

$\begin{array}{llrr}
&&&\text {Prob}\
\text { \underline{Conditions} } &  \text { \underline{Prob.} } &\text { \underline{Return}  } &\text {\underline{xReturn}  }\
 \text { Good } &  \text {0.50} &\text {25.0\%} &\text {12.50 \%} \
\text { Average } & 0.30 & 10.0 \% & 3.00 \% \
\text { Poor } & \underline{0.20} & -28.0 \% & \underline{-5.60 \%}\
&{1.00}&&{9.90 \%} &=\text { Expected return }
\end{array}$

Freedman Flowers' Stock Has a 50% Chance of Producing a 25