Calculate the expected return on stock of Gamma Inc.:
State of the economy | Probability of the states | Percentage returns |
---|---|---|
Economic recession | 27% | -7.3% |
Steady economic growth | 40% | 3.9% |
Boom | Please calculate it | 13.7% |
Calculation of expected return:
Probability of boom= 1-0.27-0.40= 0.33
Expected return= (weight of economic*return of economic)+(weight of steady economic*return)+(weight of boom*return)
Expected return= (0.27*-7.3)+(0.40*3.9)+(0.33*13.7)= 4.11
Expected return= 7.11%
Calculate the expected return on stock of Gamma Inc.: State of the economy Probability of the...
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