You Recently Purchased a Stock That Is Expected to Earn

Multiple Choice

You recently purchased a stock that is expected to earn 12 percent in a booming economy,9 percent in a normal economy,and lose 15 percent in a recessionary economy.The probabilities of a boom,a normal economy,and a recession are 18,75,and 7 percent,respectively.What is your expected rate of return on this stock?

A) 7.93%
B) 7.45%
C) 7.86%
D) 7.75%
E) 7.68%