The Inferior Goods Co

Multiple Choice

The Inferior Goods Co. stock is expected to earn 14% in a recession, 6% in a normal economy, and lose 4% in a booming economy. The probability of a boom is 20% while the probability of a normal economy is 55% and the chance of a recession is 25%. What is the expected rate of return on this stock?

A) 6.00%
B) 6.72%
C) 6.80%
D) 7.60%
E) 11.33%