Calculate the return on stock: State of the economy Probability of the states Pe

Question

Calculate the return on stock:

State of the economy                    Probability of the states                               Percentage return onstocks

Recession                                                            16%                                                        -5.67%

Boom                                                                    39%                                                        26.7%

Steady economic growth                            45%                                                         5.5%

a.11.98%

b.13.68%

c.15.56%

d.7.98%

Show work please

Explanation / Answer

return on stock=16%*(-5.67%) + 39% * (26.7%) + 5.5%* 45%

=-0.9072 +10.413% + 2.475%

=11.98%...ans

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