Answer to Question #247576 in Statistics and Probability for Mostafa rabby

Question #247576

What is the expected return of the following investment?

Probability

Payoff

0.4

0.2

40%

10%

0.3

2%

Expert's answer

The expected return of the following investment is:

ER = 0.4×40 + 0.2×10 + 0.3×2 = 18.6%.

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