Calculation of expected rate of return

Reference no: EM1356646

You recently purchased a stock that is expected to earn 12% in a booming economy, 8% in a normal economy and lose 5% in a recessionary economy. There is a 15% probability of a boom, a 75% chance of a normal economy, and a 10% chance of a recession. What is your expected rate of return on this stock?

A. 5.00%
B. 6.45%
C. 7.30%
D. 7.65%
E. 8.30%

Reference no: EM1356646

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