Assume that an investment is forecasted to produce the following returns: a 30% probability of a 12% return; a 50% probability of a 16% return; and a 20% probability of a 19% return.What is the expected percentage return this investment will produce?
A) 33.3%
B) 16.1%
C) 9.5%
D) 15.4%

Question

Quizplus · Accepted Answer

The expected percentage return can be calculated as follows:

Expected Percentage Return = (30% x 12%) + (50% x 16%) + (20% x 19%)
                                     = 3.6% + 8% + 3.8%
                                     = 15.4%

Therefore, the best choice is (D) with an expected return of 15.4%.

Assume That an Investment Is Forecasted to Produce the Following