D Question 15 6 pts An analyst has estimated how a particula

D Question 15 6 pts An analyst has estimated how a particular stock\'s return will vary depending on what will happen to the economy. What is the expected rate of return of the company\'s stock? STOCK\'S PROBABILITY OF XPECTED OF THE RATE IF THISs STATE OCCURS OCCURRING Recession Below10 Average 20 Average0 Above Average10 Boom 60) (10) 15 40 90 20 Paragrapho

Solution

Expected rate of return=Respective probability*Respective return

=(0.1*-0.6)+(0.2*-0.1)+(0.4*0.15)+(0.2*0.4)+(0.1*0.9)

which is equal to

=0.15(or 15%).