The weighted average of the returns across all possible states of the world,where the weights are equal to the probabilities with which the different states occur is called ???????????_________.The ________ indicates how great the return is expected to be "on average."

Question

Quizplus · Accepted Answer

The weighted average of returns across all possible states of the world is called the expected value. This expected value is a measure of how great the return is expected to be "on average," making option B the correct choice. Option A is incorrect because distribution refers to the spread of data points, not the weighted average. Option C is incorrect because rate of return refers to the percentage change in value, not the weighted average of returns. Option D is incorrect because variance is a measure of the degree of dispersion of a set of data points, not the weighted average of returns.

The Weighted Average of the Returns Across All Possible States