# Question

Considering the world economic outlook for the coming year and estimates of sales and earnings for the pharmaceutical industry, you expect the rate of return for Lauren Labs common stock to range between −20 percent and +40 percent with the following probabilities.

Probability Possible Returns

0.10 .................... −0.20

0.15 .................... −0.05

0.20 .................... 0.10

0.25 .................... 0.15

0.20 .................... 0.20

0.10 .................... 0.40

Compute the expected rate of return E(Ri) for Lauren Labs.

Probability Possible Returns

0.10 .................... −0.20

0.15 .................... −0.05

0.20 .................... 0.10

0.25 .................... 0.15

0.20 .................... 0.20

0.10 .................... 0.40

Compute the expected rate of return E(Ri) for Lauren Labs.

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