Probability distribution of financing costs. Missoula Ltd decides to borrow Japanese yen for one year. The interest rate on the borrowed yen is 8 per cent. Missoula has developed the following probability distribution for the yen’s degree of fluctuation against the pound:

Given this information, what is the expected value of the effective financing rate of the Japanese yen from Missoula’s perspective?

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Possible degree of fluctuation of yen against the pound -4% Percentage probability 20% -1 0 3 30 10 40