Question

Taggart Inc.'s stock has a 50% chance of producing a 36% return, a 30% chance of producing a 10% return, and a 20% chance of producing a -28% return. What is the firm's expected rate of return? Do not round your intermediate calculations.

a. 15.71%

b. 12.01%

c. 14.01%

d. 15.40%

e. 15.86%

Answer 1

Expected rate=Respective rate*Respective probability

=(0.5*36)+(0.3*10)+(0.2*-28)

which is equal to

=15.40%