Question

CHAPTER 2-2

Exercise 2.12

		An investment consultant believes that the probability distribution of the return on investment (in percent per year) on a certain international portfolio is as given in Table 2.26.

TABLE 2.26 Probability distribution of the return on investment of the international portfolio.

Return on Investment (% per year)

Probability

		xi

p_i

		9

0.07

		10

0.15

		11

0.23

		12

0.25

		13

0.15

		14

0.12

		15

0.03

		(a) Verify that the numbers in Table 2.26 correspond to a proper probability distribution.

		(b) According to this consultant, what is the probability that the portfolio's return on investment will be at least 12%?

		(c) According to this consultant, what is the expected return on investment of the portfolio?

Answer 1