A Stock Is Expected to Return 13 Percent in an Economic

question 13

Multiple Choice

A stock is expected to return 13 percent in an economic boom, 10 percent in a normal economy, and 3 percent in a recessionary economy.Which one of the following will lower the overall expected rate of return on this stock?

• A)An increase in the rate of return in a recessionary economy
• B)An increase in the probability of an economic boom
• C)A decrease in the probability of a recession occurring
• D)A decrease in the probability of an economic boom
• E)An increase in the rate of return for a normal economy