Problem $1\mathrm{.}3$

In table $1\mathrm{.}3$ below, information about the market index, asset A and the risk$-$free as$-$

set on a normal market are stated. The nominal risk$-$free rate next year is $3\mathrm{.}5\%.$ The

probability of a recession is $85\%.$

Table $1\mathrm{.}3$: Information on prices and cash flows

Calculate the nominal expected return on asset A next year.