Question

You are considering buying stock A. If the economy grows rapidly, you may earn 35 percent on the investment, while a declining economy could result in a 10 percent loss. Slow economic growth may generate a return of 3 percent. If the probability is 14 percent for rapid growth, 17 percent for a declining economy, and 69 percent for slow growth, what is the expected return on this investment

Answer 1

Answer:

A x 0.03 =  R

Explanation:

Replace the variable A i use for the cost of the stock

R = Return

A x 0.03 =  R

Due to slow growth being expected (69% probability), then you use the 3% for slow, and therefore do the price of Stock A x 0.03 to find out the gain from the start.