Question

American Standard Corp. (AS) offers the following returns next year. What is the expected rate of return? Scenario Probability AS returns Boom 30% 15% Normal economy 40% 4% Recession 30% 6%

Answer 1

Answer:

the expected rate of return is 7.90%

Explanation:

The computation of the expected rate of return is shown below:

= Probability × respective returns

= 30% × 15% + 40% × 4% + 30% × 6%

= 4.5% + 1.6% + 1.8%

= 7.90%

Hence, the expected rate of return is 7.90%

We simply applied the above formula so that the correct value could come

And, the same is to be considered