The probabilities of different returns on a stock over the year are: $$\begin{array} {cc }
\text { Probability } & \text { Return } \
10 \% & - 5 \% \
15 \% & 0 \% \
20 \% & 5 \% \
30 \% & 10 \% \
25 \% & 20 \%
\end{array}$$
The expected return on the stock is_____ percent.

Question

The probabilities of different returns on a stock over the year are: $$\begin{array} {cc } 
\text { Probability } & \text { Return } \
10 \% & - 5 \% \
15 \% & 0 \% \
20 \% & 5 \% \
30 \% & 10 \% \
25 \% & 20 \%
\end{array}$$
The expected return on the stock is_____ percent.

Quizplus · Accepted Answer

The expected return is calculated by multiplying each possible return by its probability and then summing these products: $0.10(-5\%) + 0.15(0\%) + 0.20(5\%) + 0.30(10\%) + 0.25(20\%) = -0.5\% + 0\% + 1\% + 3\% + 5\% = 8.5\%$.

The Probabilities of Different Returns on a Stock Over the Year