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

question 57

Multiple Choice

Ronnie estimates that there are three possible return outcomes for a stock he is considering for purchase. He thinks that there is a 45% 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 5% 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 Ronnie's expected return on the stock he is considering for purchase?

• A) 8.00%
• B) 9.00%
• C) 10.25%
• D) 15.25%

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Definitions:

African American

An ethnic group in the United States with ancestors who were predominantly from sub-Saharan Africa, known for their rich cultural heritage and history.

Matriarchal

A social system in which women hold primary power, making major decisions and being at the center of authority within families, communities, or entire societies.

Cultural Pluralism

The existence of multiple distinct cultures in a society, each retaining their cultural identity while coexisting with others.

Original Culture

The inherent customs, social conduct, and norms that form the foundational aspects of a society or community as they were initially established.