Probability Distribution of Financing Costs Missoula, Inc., decides to borrow Japanese yen for 1 year. The interest rate on the borrowed yen is 8 percent. Missoula has developed the following probability distribution for the yen’s degree of fluctuation against the dollar:

POSSIBLE DEGREE OF FLUCTUATION OF YEN PERCENTAGE AGAINST THE DOLLAR PROBABILITY

–4% 20%

–1 30 0 10 3 40 Given this information, what is the expected value of the effective financing rate of the Japanese yen from Missoula’s perspective?