What is the expected return on this stock given the following information?
$\begin{array}{lrr}
\text { state of the Economy}&\text { Probabllity}&\text { Rate of}\
&\text {of State of Economy}&\text {Return if}\
&&\text {State Occurs}\
\text { Boom } & .15 & 22 \% \
\text { Normal } & .60 & 11\% \
\text { Recession } & .25 & -14 \%
\end{array}$
A)6.40%
B)6.57%
C)8.99%
D)13.40%
E)14.25%

Question

Quizplus · Accepted Answer

The expected return is the weighted average of the possible returns, where the weights are the probabilities of each state of the economy. So, the expected return is:(0.15 * 0.22) + (0.60 * 0.11) + (0.25 * -0.14) = 0.064 = 6.40%

What Is the Expected Return on This Stock Given the Following