An analyst estimates there is a probability of 18 percent that there will be a recession next year. He thinks the probability of things being normal is three times the probability of a recession, with the remaining probability assigned to a boom taking place. A stock is expected to return -12 percent in a recession, 10 percent under normal conditions and 24 percent if there is a boom. What is the expected return (in percent) on this stock? Answer to two decimals, carry intermediate calcs. to four decimals.

An analyst estimates there is a probability of 18 percent that there will be a recession next year. He thinks the probability of things being normal is three times the probability of a recession, with the remaining probability assigned to a boom taking place. A stock is expected to return -12 percent in a recession, 10 percent under normal conditions and 24 percent if there is a boom. What is the expected return (in percent) on this stock? Answer to two decimals, carry intermediate calcs. to four decimals.

A First Course in Probability (10th Edition)

10th Edition

ISBN:9780134753119

Author:Sheldon Ross

Publisher:Sheldon Ross

Chapter1: Combinatorial Analysis

Section: Chapter Questions

Problem 1.1P: a. How many different 7-place license plates are possible if the first 2 places are for letters and...

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