Question: An analyst has estimated how a particular stocks return will vary depending on what will happen to the economy. What is the expected rate of

An analyst has estimated how a particular stocks return will vary depending on what will happen to the economy. What is the expected rate of return?

  1. STATE OF THE ECONOMY PROBABILITY OF STATE OCCURRING

    STOCK'S EXPECTED RATE IF THIS STATE OCCURS

    Recession

    Below Average

    Average

    Above Average

    Boom

    .10

    .20

    .40

    .20

    .10

    (.60)

    (.10)

    .15

    .40

    .90

A15.00%

B12.00%

C16.00%

D11.00%

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