Question

25. Based on the following information Return Probability. -12 1/4 12 1/2 24 1/4 Calculate the expected return (2 Points) 10 9 6 15 none of the answers is correct

Answer 1

Answer 25: b) 9

Explanatory Solution:

Given:

S.NO.	Return	Probability
1	-12	1/4
2	12	1/2
3	24	1/4

To Calculate:

The Expected Return.

Formula:

Expected Return = (p1×r1) + (p2×r2) + (p3×r3) ……...(pN×rN)

p= Probability of each return.

r= Return of respective probabilities.

On putting the values in the formula, we get:

Expected Return = (-12 × 1/4) + (12 × 1/2) + (24 × 1/4)

= (-3) + (6) + (6)

= -3+12

= 9

Expected Return = 9

Ans: b) 9