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11 February, 18:17

your investment has a 20% chance of earning 30% rate of return, a 50% chance of earning a 10% rate of return, and a 30% chance of losing 7%. what is your expected return on investment

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  1. 11 February, 18:40
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    8.9%

    Explanation:

    From the question above

    - The investment has 20% chance of earning 30% rate of return

    = 20/100

    Number or chances = 0.2

    - The investment has a 50% chance of earning 10% rate of return

    = 50/100

    Number of chances = 0.5

    - The investment has 30% chance of losing 7%

    = 30/100

    Number of chances = 0.3

    Therefore, the expected return on investment can be calculated as follows

    =0.2 (30) + 0.5 (10) + 0.3 (-7)

    =6 + 5 - 2.1

    = 11-2.1

    = 8.9%

    Hence the expected return on investment is 8.9%
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