Seattle Best Company common stock is currently selling for $40 per share. Security analysts at Goldman Sachs have assigned the following probability distribution to the price of (and rate of return on) Seattle Best stock one year from now:
Price Rate of Return Probability
$35 -12.5% 0.55
$45 12.5% 0.30
$55 +37.5% 0.13
$65 +62.5% 0.02
Assuming that Seattle Best is not expected to pay any dividends during the coming year, determine the expected rate of return on Seattle Best Stock.
A. 30.00%
B. -6.25%
C. 3.00%
D. 10.05%