You recently purchased a stock that is expected to earn 23 percent in a booming

Question

You recently purchased a stock that is expected to earn 23 percent in a booming economy, 12 percent in a normal economy, and lose 3 percent in a recessionary economy. There is a 24 percent probability of a boom, a 69 percent chance of a normal economy, and a 7 percent chance of a recession. What is your expected rate of return on this stock?

You recently purchased a stock that is expected to earn 23 percent in a booming economy, 12 percent in a normal economy, and lose 3 percent in a recessionary economy. There is a 24 percent probability of a boom, a 69 percent chance of a normal economy, and a 7 percent chance of a recession. What is your expected rate of return on this stock?

Explanation / Answer

13.59 percent

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