Use the following information on states of the economy and stock returns to calc
ID: 2673922 • Letter: U
Question
Use the following information on states of the economy and stock returns to calculate the expected return for Dingaling Telephone: (Round your answer to 2 decimal places. Omit the "%" sign in your response.)
State of Economy Probability of State of Economy Security Return if State Occurs
Recession .50 -10.00%
Normal .30 15.00
Boom .20 21.00
Expected Return:
Explanation / Answer
We will calculated the weighted average of the returns: .50(-.10) + .30(.15) + .20(.21) = .037 The expected return is 3.7%.