The Risk-Free Rate Is 2 A)688%
B)6

question 47

Multiple Choice

The risk-free rate is 2.05%. What is the expected risk premium on this stock given the following information?
$\begin{array}{lrr}\text { State of the Economy } & \text { Probability of } & \text { Rate of Return if } \\& \text { State of Economy } & \text { state occurs }\\\text { Boom } & .35 & 16\%\\\text { Normal } & .65 & 6 \%\end{array}$

• A)6.88%
• B)6.95%
• C)7.32%
• D)7.45%
• E)7.59%

---

Definitions:

Punishment Consistent

The reliable and systematic application of a negative consequence following an undesired behavior in order to decrease its occurrence.

More Severe

Describing a condition or situation that is of greater intensity, seriousness, or urgency than previously noted or compared to others.

Observational Learning

A form of learning that occurs through observing the behavior of others and the consequences of that behavior.

Reinforcement

In operant conditioning, any event that strengthens, or increases the frequency of, a desired behavior.