The following is the daily return schedule for operating various businesses under bad, normal, and good weather. Type of Business Return on Investment Normal Weather Good Weather (Probability 0.25) (Probability = 0.5) 16% -8% 12% 12% 12% 10% 6% 8% Bad Weather (Probability -12% 20% -8% -4% 0.25) Ice Cream Shop Coffee Shap Bikini Shop Cold Drinks Shop Akaldeep has a portfolio consisting of 14% in an Ice Cream Shop, 29% in a Coffee Shop, 14% in a Bikini Shop, and the rest in a Cold Drinks Shop. Determine the expected overall return rate on his investments.

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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The following is the daily return schedule for operating various businesses under bad, normal, and good weather.
Type of Business
Return on Investment
Good Weather Normal Weather
(Probability = 0.25) (Probability = 0.5)
12%
10 %
16%
-8%
12%
12%
6%
O a. 6.44%
O b. 6.44%
OC 2.42%
O d. 3.87%
Oe. 7.14%
8%
Bad Weather
(Probability
-12%
20 %
-8%
-4%
0.25)
Ice Cream Shop
Coffee Shop
Bikini Shop
Cold Drinks Shop
Akaldeep has a portfolio consisting of 14% in an Ice Cream Shop, 29% in a Coffee Shop, 14% in a Bikini Shop, and the
rest in a Cold Drinks Shop. Determine the expected overall return rate on his investments.
3
Transcribed Image Text:The following is the daily return schedule for operating various businesses under bad, normal, and good weather. Type of Business Return on Investment Good Weather Normal Weather (Probability = 0.25) (Probability = 0.5) 12% 10 % 16% -8% 12% 12% 6% O a. 6.44% O b. 6.44% OC 2.42% O d. 3.87% Oe. 7.14% 8% Bad Weather (Probability -12% 20 % -8% -4% 0.25) Ice Cream Shop Coffee Shop Bikini Shop Cold Drinks Shop Akaldeep has a portfolio consisting of 14% in an Ice Cream Shop, 29% in a Coffee Shop, 14% in a Bikini Shop, and the rest in a Cold Drinks Shop. Determine the expected overall return rate on his investments. 3
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