A stockbroker calls you and suggests that you invest in the Lauren Computer Company. After analyzing the

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A stockbroker calls you and suggests that you invest in the Lauren Computer Company. After analyzing the firm’s annual report and other material, you believe that the distribution of expected rates of return is as follows:
LAUREN COMPUTER CO.
Possible Rate of Return Probability
−0.60 ........... 0.05
−0.30 ........... 0.20
−0.10 ........... 0.10
0.20 ........... 0.30
0.40 ........... 0.20
0.80 ........... 0.15
Compute the expected return [E(Ri)] on Lauren Computer stock.

Distribution
The word "distribution" has several meanings in the financial world, most of them pertaining to the payment of assets from a fund, account, or individual security to an investor or beneficiary. Retirement account distributions are among the most...
Expected Return
The expected return is the profit or loss an investor anticipates on an investment that has known or anticipated rates of return (RoR). It is calculated by multiplying potential outcomes by the chances of them occurring and then totaling these...
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Investment Analysis and Portfolio Management

ISBN: 978-0538482387

10th Edition

Authors: Frank K. Reilly, Keith C. Brown

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