You Recently Purchased a Stock That Is Expected to Earn

question 81

Multiple Choice

You recently purchased a stock that is expected to earn 30 percent in a booming economy,9 percent in a normal economy,and lose 33 percent in a recessionary economy.There is a 5 percent probability of a boom and a 75 percent chance of a normal economy.What is your expected rate of return on this stock?

• A)-3.40 percent
• B)-2.25 percent
• C)1.65 percent
• D)2.60 percent
• E)3.50 percent