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Question

The Hennessey Hospitality Corp. is expected to generate different returns on one share of its common stock based

on the different states of the economy. These are shown in the following data table below:


State of the Economy

Probability (p_each state)

Anticipated Rate of Return (r)

Recession

10.00%

-5.00%

Moderate Growth

60.00%

6.00%

Boom

30.00%

18.00%


Based on the financial data given above, what is the expected return of a share of Hennessey's common stock?


A. 10.12%


B. 9.10%


C. 8.50%


D. 5.00%

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