Problem:
Ronnie estimates that there are three possible return outcomes for a stock he is considering for purchase. He thinks that there is a 45% chance the economy will boom and his stock will return 25%, a 50% chance the economy will continue at its current pace and the stock will return 8%, and finally, that there is a 5% chance that the economy will falter and the expected return on his stock will be -10%.
Required:
Question: Given these probabilities and conditional expected returns, what is Ronnie's expected return on the stock he is considering for purchase?
Note: Please show guided help with steps and answer.