The probability of a boom is 20 percent of a normal economy


High Flier's common stock is expected to return 28 percent in a boom economy, 14 percent in a normal economy, and -32 percent in a recession. The probability of a boom is 20 percent, of a normal economy is 70 percent, and of a recession is 10 percent. What is the expected return on High Flier's common stock?

A. 9.8 percent
B. 10.9 percent
C. 11.4 percent
D. 12.2 percent
E. 13.6 percent

 

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Finance Basics: The probability of a boom is 20 percent of a normal economy
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