Reference no: EM131931200

After some study of the economy, your forecast for next year is that a boom economy has a 30% chance of occurring, a neutral economy 50%, and a bust economy a 20% chance of occurring. You also estimate that a certain stock would have a return of 32% in a boom economy next year, 16% in a neutral economy , and -10% in a bust economy. The risk-free rate is 4.6%. What is the expected return for this stock next year? (Answer to the nearest tenth of a percent, but do not use a percent sign).

Probability

Return

Boom Economy

30%

32%

Neutral Economy

50%

16%

Bust Economy

20%

-10%