The stock for L-Corp expects a 12% return in a down economy,15% in a normal economy,and 20% in a booming economy.What is the expected return if there is a 20% chance for a down economy and a 65% chance for a normal economy?
A) 13.05%
B) 15.00%
C) 15.15%
D) 15.55%
E) 14.25%

Question

Quizplus · Accepted Answer

Expected return = E(k) = Pr₁k₁ + Pr₂k₂ + ... + Pr_nk_n Expected return = .12 × .2 + .15 × .65 + .20 × .15 = 15.15%

The Stock for L-Corp Expects a 12% Return in a Down