You Recently Purchased a Stock That Is Expected to Earn

question 20

Multiple Choice

You recently purchased a stock that is expected to earn 12% in a booming economy,8% in a normal economy and lose 5% in a recessionary economy. There is a 15% probability of a boom,a 75% chance of a normal economy,and a 10% chance of a recession. What is your expected rate of return on this stock?

• A) 5.00%
• B) 6.45%
• C) 7.30%
• D) 7.65%
• E) 8.30%

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Definitions:

Information Processing

The methods by which humans take in, use, and store information, often compared to the operations of a computer.

Biological Rhythm

Natural cycles of physical, emotional, or mental activity in living organisms, often synchronized with environmental factors like light and dark cycles.

Circadian Rhythm

The natural internal process that regulates the sleep-wake cycle and repeats roughly every 24 hours.

Sleep Cycle

A progression through several stages of sleep, including REM (rapid eye movement) and non-REM stages, typically recurring multiple times throughout a night's sleep.