You Recently Purchased a Stock That Is Expected to Earn

Multiple Choice

You recently purchased a stock that is expected to earn 12.6 percent in a booming economy,8.9 percent in a normal economy,and lose 5.2 percent in a recessionary economy.Each economic state is equally likely to occur.What is your expected rate of return on this stock?

A) 6.47 percent
B) 8.90 percent
C) 5.43 percent
D) 7.65 percent
E) 7.01 percent