If an investment is 80 percent likely to gain 40 percent but also 20 percent likely to lose 10 percent, then its average expected rate of return is:

0.30

Explanation:

To get the expected return you need to multiply each probability scenario percentage by the investment return percentage under that scenario, then add the resulting amounts together to find the investment expected return:

Scenario          Probability          Return          Result

1                        80%                     40%             0.32

2                       20%                     -10%             -0.02

Expected return = 0.32-0.02 = 0.30

Note: The expected return is a way of determining the average net outcome of a possible investment, it is a good tool to get information about the investment but the final decision shouldn't be base on this item only, especially when you have a probability of a negative return.

urban company reports the following information regarding its production cost: units produced 37,000 units direct labor $ 30 per unit direct materials $ 35 per unit variable overhead $ 237,000 in total fixed overhead $ 127,000 in total