You Recently Purchased a Stock That Is Expected to Earn

question 195

Multiple Choice

You recently purchased a stock that is expected to earn 16% in a booming economy, 12% in a normal economy, and lose 8% in a recessionary economy. There is a 20% probability of a boom, a
70% chance of a normal economy, and a 10% chance of a recession. What is your expected rate of
Return on this stock?

• A) 6.00%
• B) 6.67%
• C) 8.60%
• D) 10.80%
• E) 12.40%

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Definitions:

Food

any nutritious substance that people or animals eat or drink to maintain life and growth.

Infirmity

Illness, disease.

Illness

A condition that negatively affects a person's normal physiological or psychological state, often characterized by specific signs and symptoms.

Disease

A disorder of structure or function in a human, animal, or plant, especially one that produces specific signs or symptoms or that affects a specific location and is not simply a direct result of physical injury.