Question
Asked Sep 22, 2019
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Everrest Inc.'s stock has a 53% chance of producing a 14.25% return, a 25% chance of producing a 27.50% return, and a 22% chance of producing a –4.25% return.  What is the firm's expected rate of return?

Round your answer to two decimal places. For example, if your answer is $345.6671 round as 345.67 and if your answer is .05718 or 5.7182% round as 5.72.
A. 15.52%
B. 11.74%
C. 13.49%
D. 13.09%
E. 14.98%
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Expert Answer

Step 1

Stock:

 

A kind of investment that are made by the investors, in order to get more returns is referred to as the stock. For investors, it is an asset, and for the company, it is a liability. After the purchase of a stock of a company, an investor holds the ownership right.

Step 2

Calculate the expected rate of ret...

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Expected rate of return=(53% of 14.25)+(25% of 27.50) +(22% of - 4.25) 53 -x 14.25 100 25 x 27.50 100 22 x-4.25 100 =7.55 6.88-0.94 13.49%

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