The Rotor Co

Multiple Choice

The Rotor Co. stock is expected to earn 16% in a recession,7% in a normal economy,and lose 3% 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) 6.67%
B) 7.25%
C) 7.32%
D) 8.40%
E) 12.50%