Question

Delta’s stock has 30% chance of producing a 15% return, a 40% chance of producing a 10% return, and a 30% chance of producing a 2% return. What is the firm's expected rate of return?

Answer 1

according to the formula expected portfolio return:

$0.3\times15+0.4\times10+0.3\times2=4.5+4+0.6=9.1 \%$ return.