What is the expected return on this stock given the following information?
$\begin{array}{lcc}
\text { State of the Economy}&\text { Probability}&\text { E(R)}\
\text { Boom } & .4 & 12\% \
\text { Recession } & .6 & -12\%
\end{array}$

A)5.70%
B)5.20%
C)4.80%
D)3.70%
E)2.40%

Question

What is the expected return on this stock given the following information?
$\begin{array}{lcc}
\text { State of the Economy}&\text { Probability}&\text { E(R)}\
\text { Boom } & .4 & 12\% \
\text { Recession } & .6 & -12\%
\end{array}$

A)5.70%
B)5.20%
C)4.80%
D)3.70%
E)2.40%

Quizplus · Accepted Answer

The expected return is calculated by multiplying each possible return by its probability and summing the results: (0.4 * 12%) + (0.6 * -12%) = 4.8% - 7.2% = -2.4%.

What Is the Expected Return on This Stock Given the Following