The Common Stock of Taylor & Smith Is Expected to Earn

Multiple Choice

The common stock of Taylor & Smith is expected to earn 2% in a recession, 9% in a normal economy, and 13% in a booming economy. The probability of a boom is 15% while the probability of a normal economy is 75% and the chance of a recession is 10%. What is the expected rate of return on this stock?

A) 8.35%
B) 8.52%
C) 8.67%
D) 8.81%
E) 8.90%