Investment X has a 30% chance of achieving a 7% rate of return, 45% chance of returning 13.5% and a 25% chance of returning 25%. What is the average expected rate of return for Investment X:

Question

Quizplus · Accepted Answer

The expected rate of return is calculated by multiplying each possible return by its probability and summing the results: (0.30 * 7%) + (0.45 * 13.5%) + (0.25 * 25%) = 14.4%.

Investment X Has a 30% Chance of Achieving a 7