Question 212719: Compute the expected rate of return of Asset A that has a rate of return 8%, 13%, and 18% and a probability of 30%, 60%, and 10% respectively.
Answer by stanbon(75887)   (Show Source):
You can put this solution on YOUR website! Compute the expected rate of return of Asset A that has a rate of return 8%, 13%, and 18% and a probability of 30%, 60%, and 10% respectively.
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Random variable values are 0.08, 0.13, 0.18
Corresponding probabilities are 0.30, 0.60, 0.10
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Multiply the three pairings and add to get the expected rate.
E(x) = 0.3*0.08 + 0.6*0.13 + 0.1*0.18 = 0.12 = 12%
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Cheers,
Stan H.
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