You have been given this probability distribution for the holding period return for KMP Stock State of the Economy Boom Normal Recession

What is the expected holding period return for KMP stock?

Probability 30.50 20 HPR 18% 12% 5%

a) 10.40%

b) 9.32%

c) 11.63%

d) 11.54%

e) 10.66%

f) 10.88%

Question

Business

Nathanial Galvan

12 September, 18:08

You have been given this probability distribution for the holding period return for KMP Stock State of the Economy Boom Normal Recession

What is the expected holding period return for KMP stock?

Probability 30.50 20 HPR 18% 12% 5%

a) 10.40%

b) 9.32%

c) 11.63%

d) 11.54%

e) 10.66%

f) 10.88%

+4

Answers (1)

Know the Answer?

Toodles · Answer 1

Answer: The answer is a

Explanation:

Using the formula

Expected Rate of Return = ∑ (i = 1 to n) Ri Pi

Where Ri = Return in scenario 1

Pi = Probability for the return in scenario 1

i = Number of scenario

n = Total number of probability and Return

P1=30

R1 = 18

P2 = 50

R2 = 12

P3 = 20

R3 = -5

Expected Gain = (30 * 18) + (50 * 12) + (20 * - 5)

= 540 + 600 + - 100

= 1,040

= 1,040 : 100

= 10.4%

You have been given this probability distribution for the holding period return for KMP Stock State of the Economy Boom Normal RecessionWhat is the expected holding period return for KMP stock?Probability 30.50 20 HPR 18% 12% 5%a) 10.40%b) 9.32%c) 11.63%d) 11.54%e) 10.66%f) 10.88%

You have been given this probability distribution for the holding period return for KMP Stock State of the Economy Boom Normal Recession

What is the expected holding period return for KMP stock?

Probability 30.50 20 HPR 18% 12% 5%

a) 10.40%

b) 9.32%

c) 11.63%

d) 11.54%

e) 10.66%

f) 10.88%