Expected return = (.42 1) + (.58 -.5)
Variance = Sqrt ((.42 (1-.13)^2) + (.58(-.5-.13)^2)
= 74.03%
Return on investment is the main measure of the success of any venture (ROI). This ratio is used to analyze an investment's return or loss in relation to its cost.
Evaluating the current or predicted return on an investment is useful when deciding whether to launch a new project, evaluate the performance of your stock portfolio, or take into consideration a firm investment.
The attractiveness of alternative investment possibilities is evaluated and ranked in business research using ROI and other cash flow indicators, such as internal rate of return (IRR), net present value (NPV), and others.
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