You Recently Purchased a Stock That Is Expected to Earn

Multiple Choice

You recently purchased a stock that is expected to earn 15 percent in a booming economy,9 percent in a normal economy and lose 5 percent in a recessionary economy.There is a 15 percent probability of a boom,a 75 percent chance of a normal economy,and a 10 percent chance of a recession.What is your expected rate of return on this stock?

A) 8.00%
B) 7.45%
C) 8.50%
D) 7.75%
E) 9.50%