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Annual Return...Probability

15% ...0.2

20%...0.4

30% ...0.3

35% ...0.1

The table gives the probability distribution of the annual rate of return on the stock of MNP Company, Inc.


The expected value of the rate of return is ______%.

Verified Answer :

Edufirst

Calculation:
15%0.2 + 20%0.4 + 30%0.3 + 35%0.1 = 23.5%

Answer:
The expected value of the rate of return is 23.5%

 

Answer: The expected value of the rate of return is 23.5%.

Step-by-step explanation:

Since we have given that

Annual Return                   Probability

15%                                       0.2

20%                                      0.4

30%                                      0.3

35%                                      0.1

We need to find the expected value of the rate of return:

As we know the formula for "Expected value ": \(E(x)=\sum xp(x)\)

So, it becomes,

\(E(X)=15\times 0.2+20\times 0.4+30\times 0.3+35\times 0.1=23.5\%\)

Hence, the expected value of the rate of return is 23.5%.

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