Albert Estimates That There Are Three Possible Return Outcomes for a Stock

question 61

Multiple Choice

Albert estimates that there are three possible return outcomes for a stock he is considering for purchase.He thinks that there is a 35% chance the economy will boom and his stock will return 25%,a 50% chance the economy will continue at its current pace and the stock will return 8%,and finally,that there is a 15% chance that the economy will falter and the expected return on his stock will be -10%.Given these probabilities and conditional expected returns,what is Albert's expected return on the stock he is considering for purchase?

• A)8.00%
• B)11.25%
• C)14.75%
• D)15.25%

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Definitions:

Perceptual Systems

The sensory systems involved in processing and interpreting information from the environment, such as vision, hearing, touch, taste, and smell.

Concrete Operational

A stage in Piaget's theory of cognitive development, occurring from about 7 to 12 years of age, where children gain the ability to think logically about concrete events.

Formal Operational

The stage in Piaget's theory of cognitive development where individuals are able to think abstractly, logically, and systematically.

Preoperational

A stage in Jean Piaget's theory of cognitive development, where children from 2 to 7 years old develop memory and imagination, but do not yet think logically.