Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

John plans to invest in a stock. He finds that the market condition in the coming year is very uncertain. He makes the following prediction.

John plans to invest in a stock. He finds that the market condition in the coming year is very uncertain. He makes the following prediction. If the market is good (the probability is 0.4), the return of the stock will be 18%; if the market is normal (the probability is 0.4), the return from it will be 14%; if the market is bad (the probability is 0.2), the return from it will be only 7%. Please calculate the expected return of this stock.

Group of answer choices

14.2%

6.5%

13.8%

8%

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Entrepreneurial Finance

Authors: Steven Rogers

4th Edition

1260461440, 978-1260461442

More Books

Students also viewed these Finance questions