You Are Considering Purchasing Stock S

question 57

Multiple Choice

You are considering purchasing stock S.This stock has an expected return of 8% if the economy booms and 3% if the economy goes into a recessionary period.The overall expected rate of return on this stock will:

• A)increase as the probability of a boom economy increases.
• B)increase as the probability of a recession increases.
• C)vary inversely with the growth of the economy.
• D)be equal to 75% of 8% if there is a 75% chance of a boom economy.
• E)be equal to one-half of 8% if there is a 50% chance of an economic boom.

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