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After some study of the economy, your forecast for next year is that a boom economy has a 30% chance of occurring, a neutral economy

After some study of the economy, your forecast for next year is that a boom economy has a 30% chance of occurring, a neutral economy 50%, and a bust economy a 20% chance of occurring. You also estimate that a certain stock would have a return of 34% in a boom economy next year, 20% in a neutral economy , and -13% in a bust economy. The risk-free rate is 4.2%. What is the expected risk premium for this stock next year? (Answer to the nearest tenth of a percent, but do not use a percent sign). Probability Return Boom Economy 30% 34% Neutral Economy 50% 20% Bust Economy 20% -13% Risk-Free Rate = 4.2%

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