Question

Calculate the expected return on stock Gamma Inc.:

State of the economy Probability of the States percentage returns
Economic recession 14% -5.2%
Steady economic growth 44% 2.2%
Boom please calculate it 10.5%

Round answer to two decimal places in percentage form

Answer 1

State of economy			Probability of state			Returns			Expected return
			a			b			c=a*b
Economic			14%			-5.2%			-0.73%
Steady			44%			2.2%			0.97%
Boom		(Balancing)	42%			10.5%			4.41%
Total			100%						4.65%
Thus,
Expected return on stock is 4.65%