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Sweet Inc. conducted an extensive analysis of the economy and concluded that the probability of a recession next year is 30 percent, the probability of
Sweet Inc. conducted an extensive analysis of the economy and concluded that the probability of a recession next year is 30 percent, the probability of a boom is 40 percent, and the probability of a stable economy is 30 percent. Your boss has estimated that the price of PakCom Ltd. will be $56 if there is a recession, $106 if there is a boom, and $81 if the economy is stable. Currently, PakCom is trading for $76. Calculate the ex ante expected return on PakCom.
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