A Stock Is Expected to Return 10% When the Risk-Free

question 13

Multiple Choice

A stock is expected to return 10% when the risk-free rate is 4%.What is the correct discount rate to use for the expected payoff on an option in the real world?

• A) 4%
• B) 10%
• C) More than 10%
• D) It could be more or less than 10%

---

Definitions:

Dishabituation

The renewal of a response, previously habituated, due to the presentation of a novel stimulus.

Sensitization

The process of becoming more sensitive to a stimulus after exposure; it leads to an amplified response to a preexisting stimulus.

Habituation

The process by which an organism decreases or ceases its responses to a repetitive or prolonged stimulus, indicating a basic form of learning.

Behavioral Contrast

occurs when a change in the conditions of reinforcement for one behavior leads to a change in the rate of responding for another behavior.