You Recently Purchased a Share That Is Expected to Earn

question 97

Multiple Choice

You recently purchased a share that is expected to earn 12% in a booming economy, 8% in a normal economy and lose 5% in a recessionary economy.There is a 15% probability of a boom, a 75%
Chance of a normal economy, and a 10% chance of a recession.What is your expected rate of return
On this share?

• A)5.00%
• B)6.45%
• C)7.30%
• D)7.65%
• E)8.30%

---

Definitions:

Keynesian Economists

Keynesian economists follow the theories of John Maynard Keynes, emphasizing the importance of total spending in the economy and its effects on output and inflation.

Decision Making

The process of making choices or selecting options among various alternatives, often based on reasoning or data analysis.

Fiscal Policy

Government policies concerning taxation and spending that influence economic conditions.

Monetary Policy

Monetary policy involves the management of a nation's money supply and interest rates by the central bank to control inflation, stabilize currency, and achieve economic growth.