Phoenix Company Common Stock Is Currently Selling for $20 Per

Multiple Choice

Phoenix Company common stock is currently selling for $20 per share. Security analysts at Smith Blarney have assigned the following probability distribution to the price of (and rate of return on) Phoenix stock one year from now: $$\begin{array} { l l l } \text { Price } & \text { Rate of Return } & \text { Probability } \\\$ 16 & - 20 \% & 0.25 \\\$ 20 & 0 \% & 0.30 \\\$ 24 & + 20 \% & 0.25 \\\$ 28 & + 40 \% & 0.20\end{array}$$ Assuming that Phoenix is not expected to pay any dividends during the coming year, determine the expected rate of return on Phoenix Stock.

A) 8%
B) 0%
C) 10%
D) 40%