The Inferior Goods Co. stock is expected to earn 14% in a recession, 6% in a normal economy, and lose 4% in a booming economy. The probability of a boom is 20% while the probability of a normal
Economy is 55% and the chance of a recession is 25%. What is the expected rate of return on this
Stock?
A) 6.00%
B) 6.72%
C) 6.80%
D) 7.60%
E) 11.33%

Question

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The Answer of The Inferior Goods Co. stock is expected to earn 14% in a recession, 6% in a normal economy, and lose 4% in a booming economy. The probability of a boom is 20% while the probability of a normal
Economy is 55% and the chance of a recession is 25%. What is the expected rate of return on this
Stock?
A) 6.00%
B) 6.72%
C) 6.80%
D) 7.60%
E) 11.33%