Given the Following Probability Distribution, Calculate the Expected Return of Security

question 5

Multiple Choice

Given the following probability distribution, calculate the expected return of security XYZ. $\begin{array}{c}\begin{array}{lll} \text {Security XYZ's}\\\underline{\text {Potential return}}\\ 20 \% \\ 30 \% \\ -40 \% \\50 \% \\10 \% \end{array}\begin{array}{lll}\\\underline{\text {Probability}}\\0.3 \\0.2 \\0.1 \\0.1 \\0.3 \end{array}\end{array}$

• A) 16 percent
• B) 22 percent
• C) 25 percent
• D)18 percent

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Definitions:

Federal Government

The national government of a federal country, such as the United States, responsible for enacting and enforcing laws applicable across all states and territories.

Expenditures

Refers to the amount of money spent by either an individual, business, or government on goods and services.

Budget Deficit

The financial situation in which government expenditures exceed revenues.

Social Security

A government program that provides financial assistance to people with inadequate or no income, especially the elderly, disabled, and families with dependent children.