The Risk-Free Rate Is 3 A)209%
B)3

Multiple Choice

The risk-free rate is 3.5%. What is the expected risk premium on this security given the following information?
$\begin{array}{lcc}\text { State of the Economy }&\text { Probability}&\text { E(R) }\\\text { Boom } & .30 &15\% \\\text { Normal } & .55 &8\% \\\text { Recession } & .20 & -11 \%\end{array}$

A) 2.09%
B) 3.01%
C) 3.20%
D) 3.87%
E) 4.15%