What Is the Expected Return on This Stock Given the Following

question 86

Multiple Choice

What is the expected return on this stock given the following information?
$\begin{array}{lcc}\text { State of the Economy}&\text { Probability}&\text { E(R) }\\\text { Boom } & .4 & 12\% \\\text { Recession } & .6 & -12\%\end{array}$

• A)5.70%
• B)5.20%
• C)4.80%
• D)3.70%
• E)2.40%

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Definitions:

Note Disclosures

Supplementary information included in financial statements, providing detailed explanations of various line items and accounting policies.

Common Size Income Statement

An income statement in which each line item is expressed as a percentage of sales revenue, facilitating comparison across companies or periods.

Cost Of Goods Sold

The direct costs attributable to the production of the goods sold by a company, including the cost of the materials and labor directly used to create the good.

Trend Statements

Rephrased: Financial reports highlighting the development and direction of financial indicators over several periods, facilitating the identification of patterns and trends.