- A company is expecting the following scenario of returns the next year. Find out the expected return.
*Possible return %**Likelihood**Probability %*14Normally likely

308Most likely

503Meagrely likely

18−2Least likely

2**Solution**Expected return = (0.14 × .30) + (0.08 ×.50) + (0.03 × 0.18) + (−0.02 × 0.02)

= 0.042 + 0.040 + 0.0054 + -0.0004 = 0.087 = 8.7%

- A company has the possible outcomes of cash flow given below:
*Probability %**Cash flow Rs*402,00,000305,00,000303,00,000Find the expected return and the variation in terms of standard deviation.

**Solution**Expected return = (0.40 × 2,00,000) + (0.30 × 5,00,000) + (0.30 × 3,00,000) ...

Start Free Trial

No credit card required