What Is the Expected Return on This Stock Given the Following

question 17

Multiple Choice

What is the expected return on this stock given the following information?
$\begin{array}{lcr}\text { State of the Economy } & \text { Probability } & E(R) \\\text { Boom } & .4 & 15\% \\\text { Recession } & .6 & -20\%\end{array}$

• A)8.07%
• B)7.69%
• C)6.00%
• D)5.70%
• E)5.20%

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Definitions:

Dispositional

Pertaining to one's inherent qualities of mind and character, often used in psychology to describe an individual's tendencies or personality traits.

Uncontrollable

Refers to events or processes that cannot be easily managed or influenced by individuals.

Self-Serving Bias

A cognitive bias that leads individuals to attribute their successes to internal factors while blaming external factors for their failures.

Differential Forgetting

Refers to the phenomenon that different types of information are forgotten at different rates, often influenced by the relevance, emotional impact, and repetition of the information.