Demand 4 company products. Probability demand occurs. Rate of return if this dem

Question

Demand 4 company products.  Probability demand occurs.  Rate of return if this demand occurs (%).

Weak                                    0.1                                       -50%
Below average                      0.2                                        (5)
Average                               0.4                                         16
Above average                      0.2                                         25
Strong                                 0.1                                          60

Explanation / Answer

Expected return is calculated as the sum of the weighted returns =(0.1 x -50%) + (0.2 x -5) + (0.4 x 16) + (0.2 x 25) + (0.1 x 60) = -5 + -1 + 6.4 + 5 + 6 = 11.4%

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