If the economy is normal, Stock A is expected to return 11.75%. If the economy falls...
If the economy is normal, Stock A is expected to return 11.75%. If the economy falls into a recession, the stock's return is projected at a negative 12%. If the economy is in a boom the stock has a projected return of 17.4% The probability of a normal economy is 60% while the probability of a recession is 20% and boom is 20%. What is the expected return of this stock? ENTER YOUR ANSWER AS A PERCENTAGE WITH ONE DECIMAL PLACE (e.g., 12.1) AND NOT AS A DECIMAL (e.g., 0.121). ROUND TO THE NEAREST TENTH OF A PERCENT. DO NOT USE THE PERCENT SIGN (%) IN YOUR ANSWER.
Homework Answers
Solution :
The expected return of the stock A in percentage is = 8.1 ( when rounded off to the nearest tenth of percent )
Please find the attached screenshot of the excel sheet containing the detailed calculation for the solution.
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If the economy is normal, Stock A is expected to return 11.75%.
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