You have been given this probability distribution for the holding period return for KMP Stock State of the Economy Boom Normal Recession

What is the expected holding period return for KMP stock?

Probability 30.50 20 HPR 18% 12% 5%

a) 10.40%

b) 9.32%

c) 11.63%

d) 11.54%

e) 10.66%

f) 10.88%

Question

Adriana Mckee

Business

12 May, 21:09

You have been given this probability distribution for the holding period return for KMP Stock State of the Economy Boom Normal Recession

What is the expected holding period return for KMP stock?

Probability 30.50 20 HPR 18% 12% 5%

a) 10.40%

b) 9.32%

c) 11.63%

d) 11.54%

e) 10.66%

f) 10.88%

+1

Answers (1)

Know the Answer?

Nadia Freeman · Answer 1

Answer: The answer is a

Explanation:

Using the formula

Expected Rate of Return = ∑ (i = 1 to n) Ri Pi

Where Ri = Return in scenario 1

Pi = Probability for the return in scenario 1

i = Number of scenario

n = Total number of probability and Return

P1=30

R1 = 18

P2 = 50

R2 = 12

P3 = 20

R3 = -5

Expected Gain = (30 * 18) + (50 * 12) + (20 * - 5)

= 540 + 600 + - 100

= 1,040

= 1,040 : 100

= 10.4%

You have been given this probability distribution for the holding period return for KMP Stock State of the Economy Boom Normal RecessionWhat is the expected holding period return for KMP stock?Probability 30.50 20 HPR 18% 12% 5%a) 10.40%b) 9.32%c) 11.63%d) 11.54%e) 10.66%f) 10.88%

You have been given this probability distribution for the holding period return for KMP Stock State of the Economy Boom Normal Recession

What is the expected holding period return for KMP stock?

Probability 30.50 20 HPR 18% 12% 5%

a) 10.40%

b) 9.32%

c) 11.63%

d) 11.54%

e) 10.66%

f) 10.88%