Yeadon Construction's stock is expected to earn 5 percent in a weak economy, 12 percent in a normal economy, 20 percent in a strong economy, 30 percent in a booming economy, and lose 20 percent in a recession. The probability of a recession is 5 percent, the probability of weak economy is 15 percent, the probability of a normal economy is 48 percent, the probablity of a strong economy is 27 percent, and the probability of a booming economy is 5 percent. What is the expected rate of return on this stock? O A. 15.17% O B. 16.72% O C. 11.66% O D. 13.41% O E. 12.41%

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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Chapter1: Investments: Background And Issues
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Yeadon Construction's stock is expected to earn 5 percent in a weak economy, 12 percent in a normal economy, 20 percent in a strong
economy, 30 percent in a booming economy, and lose 20 percent in a recession. The probability of a recession is 5 percent, the
probability of weak economy is 15 percent, the probability of a normal economy is 48 percent, the probablity of a strong economy is
27 percent, and the probability of a booming economy is 5 percent. What is the expected rate of return on this stock?
O A. 15.17%
O B. 16.72%
O C. 11.66%
O D. 13.41%
O E. 12.41%
Transcribed Image Text:Yeadon Construction's stock is expected to earn 5 percent in a weak economy, 12 percent in a normal economy, 20 percent in a strong economy, 30 percent in a booming economy, and lose 20 percent in a recession. The probability of a recession is 5 percent, the probability of weak economy is 15 percent, the probability of a normal economy is 48 percent, the probablity of a strong economy is 27 percent, and the probability of a booming economy is 5 percent. What is the expected rate of return on this stock? O A. 15.17% O B. 16.72% O C. 11.66% O D. 13.41% O E. 12.41%
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