$\begin{array}{c}
\begin{array}{c}
\underline{\text {State of the economy}}\
\text {Boom}\
\text {Recession}
\end{array}
\begin{array}{c}
\underline{\text {Probability}}\
.3\
.7\

\end{array}
\begin{array}{c}
\underline{\text {Stock Q}}\
14 \% \
8\% \

\end{array}
\end{array}$

-What is the expected return of Stock Q?
A) 12.3%
B) 9.8%
C) 10.9%
D) 11.2%
E) 8.5%

Question

$\begin{array}{c}
\begin{array}{c}
\underline{\text {State of the economy}}\
\text {Boom}\
\text {Recession}
\end{array}
\begin{array}{c}
\underline{\text {Probability}}\
.3\
.7\

\end{array}
\begin{array}{c}
\underline{\text {Stock Q}}\
14 \% \
8\% \

\end{array}
\end{array}$
  
-What is the expected return of Stock Q?
A) 12.3%
B) 9.8%
C) 10.9%
D) 11.2%
E) 8.5%

Quizplus · Accepted Answer

The expected return of Stock Q is calculated by multiplying each possible return by its probability and then summing these products: $0.3 \times 14\% + 0.7 \times 8\% = 4.2\% + 5.6\% = 9.8\%$.

-What Is the Expected Return of Stock Q? A) 12

-What Is the Expected Return of Stock Q?
A) 12