Compute the Expected Return Given These Three Economic States, Their

question 38

Multiple Choice

Compute the expected return given these three economic states, their likelihoods, and the potential returns:
$$\begin{array}{l}\begin{array} { c c r } \text { Eccrorric State }&\text { Probability } & \text { Return } \\\text { fast growth }&0.2 & 23 \% \\\text {slow growth }&0.6 & 14\% \\\text { recession }&0.2 & - 30\%\\\end{array}\end{array}$$

• A) 3.5 percent
• B) 7.0 percent
• C) 7.5 percent
• D) 12.5 percent

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Definitions:

Fault Zone

An area of multiple fractures or breaks in the Earth's crust caused by tectonic forces, associated with earthquakes and volcanic activity.

Unconformity

A geological feature that represents a break or gap in the Earth's sedimentary record, often caused by periods of erosion or lack of deposition before more sediment is laid down.

Petroleum

A liquid mixture of hydrocarbons present in certain rock strata, used primarily as a fuel source.

Oil and Gas

Natural resources found beneath the Earth's surface, used as crucial energy sources and raw materials in various industries.