Answer (B) is correct . The expected rate of return of an investment can be calculated by weighting each potential rate of return by its probability of occurrence and summing the ? results. City Development’s expected rate of return for this development is thus derived as follows: Expected Rate of Rate of Return Probability Return (5.0)% 30.0% (1.5)% 10.0% 50.0% 5.0% 20.0% 20.0% 4.0% 7.5%
Answer (A) is incorrect because This percentage is a nonsense result.
Answer (C) is incorrect because This percentage results from improperly treating the negative 5% return as a positive number.
Answer (D) is incorrect because This percentage results from treating the negative return as a positive number and weighting the three possible results equally.
| 
Calculate the expected rate of return.