You are analyzing a stock that has the following returns given the various states of economy. State of Economy Probability Return Recession 0.12 -7.20 Normal 0.68 6.80 Boom 0.2 15.40 What is the expected return on this stock?

You are analyzing a stock that has the following returns given the various states of economy. State of Economy Probability Return Recession 0.12 -7.20 Normal 0.68 6.80 Boom 0.2 15.40 What is the expected return on this stock?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter8: Basic Stock Valuation

Section: Chapter Questions

Problem 17MC: Now assume that the stock is currently selling at $30.29. What is its expected rate of return?

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Question

You are analyzing a stock that has the following returns given the various states of economy.

State of Economy	Probability	Return

Recession	0.12	-7.20
Normal	0.68	6.80
Boom	0.2	15.40

What is the expected return on this stock?

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