You Are Considering Purchasing Share S

question 7

Multiple Choice

You are considering purchasing share S.This share has an expected return of 8% if the economy booms and 3% if the economy goes into a recessionary period.The overall expected rate of return
On this share will:

• A)be equal to one-half of 8% if there is a 50% chance of an economic boom.
• B)vary inversely with the growth of the economy.
• C)increase as the probability of a recession increases.
• D)be equal to 75% of 8% if there is a 75% chance of a boom economy.
• E)increase as the probability of a boom economy increases.

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Definitions:

Net Exports

The value of a country's total exports minus its total imports, representing the contribution of trade to the national economy.

Foreign Demand

The desire and willingness of buyers from other countries to purchase goods and services, influenced by factors such as price, quality, and exchange rates.

U.S. Exports

Goods and services produced in the United States and sold to other countries.

Dollar

A unit of currency used in various countries, most notably the United States, identified as a standard monetary unit for transactions.