Assume a portfolio has the possibility of returning 7 percent,8 percent,10 percent or 12 percent with likelihood of 20 percent,30 percent 25 percent and 25 percent respectively.The expected value of the portfolio is

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The expected value is calculated by multiplying each possible return by its probability and summing the results: (0.07 * 0.20) + (0.08 * 0.30) + (0.10 * 0.25) + (0.12 * 0.25) = 0.093 or 9.3 percent.

Assume a Portfolio Has the Possibility of Returning 7 Percent,8