Assume that an investment is forecasted to produce the following returns: a 10% probability of a $1,400 return; a 50% probability of a $6,600 return; and a 40% probability of a $10,500 return.What is the expected amount of return this investment will produce?
A) $6,167
B) $7,640
C) $12,890
D) $18,500

Question

Quizplus · Accepted Answer

To calculate the expected return, we multiply the probability of each return by the return itself and sum those values. 
Expected return = (0.1 x 1,400) + (0.5 x 6,600) + (0.4 x 10,500) 
Expected return = 140 + 3,300 + 4,200 
Expected return = $7,640

Assume That an Investment Is Forecasted to Produce the Following