Ask Question
Today, 06:04

Monmouth Inc.'s stock has a 30% chance of producing a 20% return, a 30% chance of producing a 10% return, and a 40% chance of producing a - 10% return. What is the firm's expected rate of return?

+2
Answers (2)
  1. Today, 07:43
    0
    5%

    Explanation:

    The expected rate of return is the weighted average of all the possible returns associated with an investment decision. The returns are weighted using the probability associated with their outcomes.

    Expected return = WaRa + Wb+Rb + Wn+Rn

    W - weight of the outcome, R - return of the outcome

    = (0.3 * 20%) + (0.3 * 10%) + (0.4 * - 10%)

    = 5%
  2. Today, 09:04
    0
    Expected rate of return is 13%

    Explanation:

    Using the expected values method:

    Expected Rate of return = Chance 1 * Outcome 1 + Chance 2 * Outcome 2 + Chance 3 * Outcome 3 + ... Chance n * Outcome n

    So by putting values, we have:

    Expected Rate of return = 30% * 20% + 30% * 10% + 40% * 10%

    Expected Rate of return = 6% + 3% + 4% = 13%

    So the expected rate of return using the expected value method is 13%
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “Monmouth Inc.'s stock has a 30% chance of producing a 20% return, a 30% chance of producing a 10% return, and a 40% chance of producing a - ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers