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Homework answers / question archive / Question 1 (1 point) Calculate the expected return on stock of Gamma Inc
Question 1 (1 point)
Calculate the expected return on stock of Gamma Inc.:
| State of the economy | Probability of the states | Percentage returns |
|---|---|---|
| Economic recession | 30% | -4.2% |
| Steady economic growth | 37% | 3.5% |
| Boom | Please calculate it | 13.4% |
Round the answers to two decimal places in percentage form. (Write the percentage sign in the "units" box)
The probability of boom state = 1 - 0.30 - 0.37 = 0.33
Expected return on stock = 0.30 
-0.042 + 0.37 0.035 + 0.33 0.134
Expected return on stock of Gamma Inc = 4.46 %
