Stock A has the following returns for various states of the economy: State of the Economy Probability Stock A's Return Recession 10% -.30 Below Average 20% -.02 Average 40% .10 Above Average 20% .18 Boom 10% .40 Stock A's expected return is A. 7.2% B. 9.6% C. 5.4% D. 8.2%
Stock A has the following returns for various states of the economy: State of the Economy Probability Stock A's Return Recession 10% -.30 Below Average 20% -.02 Average 40% .10 Above Average 20% .18 Boom 10% .40 Stock A's expected return is A. 7.2% B. 9.6% C. 5.4% D. 8.2%
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
Stock A has the following returns for various states of the economy:
|
State of the Economy |
Probability |
Stock A's Return |
|
Recession |
10% |
-.30 |
|
Below Average |
20% |
-.02 |
|
Average |
40% |
.10 |
|
Above Average |
20% |
.18 |
|
Boom |
10% |
.40 |
Stock A's expected return is
| A. |
7.2% |
|
| B. |
9.6% |
|
| C. |
5.4% |
|
| D. |
8.2% |
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