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:

Reserve Ratio

The fraction of depositors' balances that banks must have on hand as cash, a requirement set by central banking authorities.

Gold Coins

Metal currency minted from gold, historically used as both a medium of exchange and store of value.

Receipts

Documents that acknowledge the receipt of goods or services or the receipt of money, often serving as proof of transaction.

Debit Card

A card used for purchases that directly debits funds from the user's bank account.