In: Finance
An analyst estimates there is a probability of 20 percent that there will be a recession next year. He thinks the probability of things being normal is three times the probability of a recession, with the remaining probability assigned to a boom taking place. A stock is expected to return -17 percent in a recession, 13 percent under normal conditions and 21 percent if there is a boom. What is the expected return (in percent) on this stock? Answer to two decimals, carry intermediate calcs. to four decimals.