Homework Answers
Ans : Firm expected rate of return = Probability 1 * expected return 1 at probability 1 + Probability 2 * expected return 2 at probability 2 + Probability 3 * expected return 3 at probability 3 + Probability 4 * expected return 4 at probability 4
= 50 % * 25% + 30% * 10% + 20% * (-28%)
= 0.5*0.25 + 0.3 *0.1 + 0.2 * (-0.28)
= 0.125 + 0.03 - 0.056
= 0.099
= 9.9 %
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