You Recently Purchased a Stock That Is Expected to Earn

question 76

Multiple Choice

You recently purchased a stock that is expected to earn 19 percent in a booming economy, 12 percent in a normal economy, and lose 8 percent in a recessionary economy. The probability of a boom economy is 16 percent while the probability of a normal economy is 78 percent. What is your expected rate of return on this stock?

• A) 12.40 percent
• B) 10.25 percent
• C) 11.92 percent
• D) 12.54 percent
• E) 13.50 percent

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