If the economy is normal, Stock A is expected to return 11.00%. If the economy falls...
If the economy is normal, Stock A is expected to return 11.00%. If the economy falls into a recession, the stock's return is projected at a negative 14%. If the economy is in a boom the stock has a projected return of 20.0% The probability of a normal economy is 60% while the probability of a recession is 20% and boom is 20%. What is the expected return of this stock?
**ENTER YOUR ANSWER AS A PERCENTAGE WITH ONE DECIMAL PLACE (e.g., 12.1) AND NOT AS A DECIMAL (e.g., 0.121). ROUND TO THE NEAREST TENTH OF A PERCENT.**
Homework Answers
expected return=Respective return*Respective probability
=(0.6*11)+(0.2*-14)+(0.2*20)
which is equal to
=7.8%
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