What Is the Expected Return on This Stock Given the Following

question 76

Multiple Choice

What is the expected return on this stock given the following information?
$\begin{array}{lrr}\text { state of the Economy}&\text { Probabllity}&\text { Rate of}\\&\text {of State of Economy}&\text {Return if}\\&&\text {State Occurs}\\\text { Boom } & .15 & 22 \% \\\text { Normal } & .60 & 11\% \\\text { Recession } & .25 & -14 \%\end{array}$

• A)6.40%
• B)6.57%
• C)8.99%
• D)13.40%
• E)14.25%

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Definitions:

Randomly Selected Stocks

Stocks chosen without any specific pattern, criteria, or bias, often used in sampling or experimental portfolios.

Portfolio

A collection of financial investments like stocks, bonds, commodities, cash, and cash equivalents held by an investor or institution.

Standard Deviation

A measure of the dispersion or variability in a set of values, indicating how much the values differ from the mean of the set.

Expected Return

The anticipated return on an investment, taking into account the probabilities of each possible outcome.