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    Expected return

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    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. 10.9 percent
    b. 11.4 percent
    c. 12.2 percent
    d. 13.6 percent

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    Solution Summary

    The solution explains how to calculate the expected return.