The Risk-Free Rate Is 2 A)688%
B)6

Multiple Choice

The risk-free rate is 2.05%. What is the expected risk premium on this stock given the following information?
$\begin{array}{lrr}\text { State of the Economy } & \text { Probability of } & \text { Rate of Return if } \\& \text { State of Economy } & \text { state occurs }\\\text { Boom } & .35 & 16\%\\\text { Normal } & .65 & 6 \%\end{array}$

A) 6.88%
B) 6.95%
C) 7.32%
D) 7.45%
E) 7.59%