A Stock Is Expected to Return 11% in a Normal

question 71

Multiple Choice

A stock is expected to return 11% in a normal economy,19% if the economy booms,and lose 8% if the economy moves into a recessionary period.Economists predict a 65% chance of a normal economy,a 25% chance of a boom,and a 10% chance of a recession.What is the expected return on the stock?

• A) 11.10%
• B) 12.06%
• C) 11.98%
• D) 11.23%

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