If the Economy Booms, RTF AB Equity Is Expected to Return

question 64

Multiple Choice

If the economy booms, RTF AB equity is expected to return 10%.If the economy goes into a recessionary period, then RTF is expected to only return 4%.The probability of a boom is 60% while
The probability of a recession is 40%.What is the variance of the returns on RTF?

• A).000200
• B).000760
• C).000864
• D).001594
• E).029394

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Definitions:

Balance Sheet

An accounting record that presents the total value of a corporation's assets, its obligations, and the equity belonging to shareholders, reflecting the company’s financial state at a specific time.

Prepaid Expense

An expense that has been paid in advance and is considered an asset until it is actually used or consumed.

Rental Payments

Rental payments are periodic payments made by a lessee to a lessor for the use of a property, equipment, or vehicle.

Depreciation

The process of allocating the cost of a tangible asset over its useful life, reflecting the decrease in value over time.