You recently purchased a stock that is expected to earn 16% in a booming economy, 12% in a normal economy, and lose 8% in a recessionary economy. There is a 20% probability of a boom, a 70% chance of a normal economy, and a 10% chance of a recession. What is your expected rate of return on this stock?
A) 6.00%
B) 6.67%
C) 8.60%
D) 10.80%
E) 12.40%

Question

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The Answer of You recently purchased a stock that is expected to earn 16% in a booming economy, 12% in a normal economy, and lose 8% in a recessionary economy. There is a 20% probability of a boom, a 70% chance of a normal economy, and a 10% chance of a recession. What is your expected rate of return on this stock?
A) 6.00%
B) 6.67%
C) 8.60%
D) 10.80%
E) 12.40%

You Recently Purchased a Stock That Is Expected to Earn