Answer:
<u>The expected value of the total return rate for the firm's clients is C. 7.4%</u>
Step-by-step explanation:
1. Let's review all the information given for solving the question:
Type of equity investments = A, B and C
Percentage of investment in each type of equity = 30% in A, 50% in B and 20% in C.
Rates of return of each type of equity investment = 10% for A, 6% for B and 7% for C.
2. Let's find the expected value of the total return rate for the investment firm:
Return rate for each type of investment = Percentage of investment * Rate of return
For A = 30% * 10% = 0.3 * 0.1 = 0.03
For B = 50% * 6% = 0.5 * 0.06 = 0.03
For C = 20% * 7% = 0.2 * 0.07 = 0.014
Total return rate = Return rate for A + Return rate for B + Return rate for C
Total return rate = 0.03 + 0.03 + 0.014 = 0.074
<u>Total return rate = 0.074 * 100 = 7.4%</u>
<u>The expected value of the total return rate for the firm's clients is C. 7.4%</u>
