Question

Risk Swan's Sportswoar is he table to calcuiate the expected velue of returm for the line The expected rehum for the ine le bringing ouf a line of designer jeans Attor markot ressurch rm has established the expeation shom in e folowing table about the annual rates of retum, (Click on the loon copy its contents into a on the top-right comer of the data tablo bolow in order to 0.07 0.14 0.53 0.19 0.07 0.026 Average 0.142 0226 Print Done 2 5 6 8

Answer 1

Answer: Expected return : Summation of ( Probability * Annual rate of return)

Expected return = P ( very poor ) * return(very poor)  + P(poor) * return (poor) + P(average) *return (average) + P(Good) *return(Good) + P(Excellent) * return(Excellent)

Expected return = 0.07 * 0.001 + 0.14 * 0.026 + 0.53 * 0.075 + 0.19 * 0.142 + 0.07 * 0.226

Expected return = 0.01% + 0.36% + 3.98% + 2.7% + 1.6%

Expected return = 8.63%