Dothan Inc.'s stock has a 25% chance of producing a 16% return, a 50% chance of...

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Dothan Inc.'s stock has a 25% chance of producing a 16% return, a 50% chance of...

Dothan Inc.'s stock has a 25% chance of producing a 16% return, a 50% chance of producing a 12% return, and a 25% chance of producing a -14% return. What is the firm's expected rate of return? Do not round your intermediate calculations.

	a.	4.29%
	b.	4.68%
	c.	4.51%
	d.	5.50%
	e.	6.50%

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Answer 1

Answer #1

Using the given data, the firm's expected rate of return= Probability * Return

=> (25% * 16%) + (50% * 12%) + (25% * -14%)

=> 4.00% + 6.00% + (- 3.50%) = 6.50%

Answer (e) : The firm's expected rate of return is 6.50%

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Answer 2

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