A fruit company has 20% returns in periods of normal rainfall and -3% returns in droughts. The probability of normal rainfall is 60% and droughts 40%. What would the fruit company’s expected returns be?

The fruit company’s expected returns are 10.8%

Step-by-step explanation:

The expected returns of the fruit company is given by

For the given case,

Returns in normal rainfall = x₁ = 20% = 0.20

Returns in drought = x₂ = -3% = -0.03

Probability of normal rainfall = P(x₁) = 60% = 0.60

Probability of drought = P(x₂) = 40% = 0.40

So, the expected value of returns is

Therefore, the fruit company’s expected returns are 10.8%

step-by-step explanation:

the answer is 89 d

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