Expected Return An analyst estimates that a stock has the following return probabilities and returns depending on the state of the economy:
|
State of Economy |
Probability |
Return |
|
Good |
0.1 |
15% |
|
Normal |
0.6 |
13 |
|
Poor |
0.3 |
7 |
What is the expected return of the stock?
a. 7.8 percent
b. 11.4 percent
c. 11.7 percent
d. 13.0 percent