You Recently Purchased a Stock That Is Expected to Earn

question 154

Multiple Choice

You recently purchased a stock that is expected to earn 19% in a booming economy, 11% in a normal economy and lose 15% in a recessionary economy. There is a 20% probability of a boom, a 65% chance of a normal economy, and a 15% chance of a recession. What is your expected rate of return on this stock?

• A) 6.8%
• B) 7.4%
• C) 8.7%
• D) 11.6%
• E) 13.2%

---

Definitions:

Ebbinghaus' Retention Curve

A graphical representation of the decline in memory retention over time, illustrating that memories diminish if not rehearsed.

Chunking

A strategy for making more efficient use of short-term memory by grouping information into larger units.

Relearning

The process of learning material or skills for a second time, often more quickly than the first, indicating the retention of latent knowledge.

Encoding

The process by which information is transformed into formats that can be stored in memory.