Inferior Goods SpA Equity Is Expected to Earn 14% in a Boom

question 28

Multiple Choice

Inferior Goods SpA equity is expected to earn 14% in a boom, 6% in a normal economy, and lose 4% in a recession economy.The probability of a boom is 20% while the probability of a normal
Economy is 55% and the chance of a recession is 25%.What is the expected rate of return on this
Share?

• A)5.10%
• B)6.72%
• C)6.80%
• D)7.60%
• E)11.33%

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Definitions:

Vicarious Liability

A legal principle where one party is held liable for the actions of another party, such as an employer being responsible for the acts of its employees.

Strict Liability

A legal principle where responsibility for damages is assigned without the need to prove negligence or fault.

Duty of Care

A legal obligation imposed on an individual requiring adherence to a standard of reasonable care while performing any acts that could harm others.

Vicarious Liability

A legal principle where one party is held liable for the actions of another party, typically in employer-employee relationships.