ob Walters, who frequently invests in the stock market, carefully studies any potential investment. He is currently examining the possibility of investing in the Trinity Power Company. Through studying past performance, Walters has broken the potential results of the investment into five possible outcomes with accompanying probabilities. The outcomes are annual rates of return on a single share of stock that currently costs $150. Find the expected value of the return for investing in a single share of Trinity Power.
| Return on investment ($) | 0.00 | 10.00 | 15.00 | 25.00 | 50.00 |
| Frequency | 0.20 | 0.25 | 0.30 | 0.15 | 0.10 |
f Walters purchases stock whenever the expected rate of return exceeds 10 percent, will he purchase the stock, according to these data?
Solution
