Question

The common stock of Manchester & Moore is expected to earn 17 percent in a recession, 7 percent in a normal economy, and lose 8 percent in a booming economy. The probability of a boom is 15 percent while the probability of a recession is 5 percent. What is the expected rate of return on this stock?

Answer 1

17*5%

7%*(100%-5%-15%)

- 8%*15%

Step-by-step explanation:

Calculate the above, sum the total, and that's the expected rate of return.