Question
A stock analyst believes that a stock will earn the following returns next period depending on the state of the economy. Given the probabilities of
A stock analyst believes that a stock will earn the following returns next period depending on the state of the economy. Given the probabilities of each state of the economy, what is the expected return on the stock?
| State of Economy | Probability | Return if State Occurs |
| Depression | 20% | -14% |
| Normal | 65% | 10% |
| Boom | 15% | 19% |
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An Introduction to Investment Banks, Hedge Funds, and Private Equity
Authors: David P. Stowell
1st edition
978-0123745033, 0123745039, 978-9380931074
