What Is the Expected Return on a Portfolio That Will

question 58

Multiple Choice

What is the expected return on a portfolio that will decline in value by 13 percent in a recession, will increase by 16 percent in normal times, and will increase by 23 percent during boom times if each scenario has equal likelihood?

• A)8.67 percent
• B)13.00 percent
• C)13.43 percent
• D)17.33 percent

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Definitions:

Positive Reference Group

A group that individuals admire and wish to be like or be associated with, influencing their behavior and attitudes positively.

Weight-of-numbers Bias

A cognitive bias where the sheer amount of information or data points available influences the perception of an argument's strength.

Minority Influence

Social influence processes whereby numerical or power minorities change the attitudes of the majority.

Asch's Study

A social psychology experiment by Solomon Asch that demonstrated the influence of group pressure on conformity.