Rosita owns a stock with an overall expected return of 14.40 percent.The economy is expected to either boom or be normal.There is a 52 percent chance the economy will boom.If the economy booms,this stock is expected to return 15 percent.What is the expected return on the stock if the economy is normal?
A) 12.00 percent
B) 12.83 percent
C) 13.15 percent
D) 13.75 percent
E) 14.40 percent

Question

Quizplus · Accepted Answer

14.40 = (0.52 × 15) + (1 - 0.52) (x); x = 13.75 percent

Rosita Owns a Stock with an Overall Expected Return of 14.40