The Expected Return on a Security Is Currently Based on a 22

question 90

Multiple Choice

The expected return on a security is currently based on a 22 percent chance of a 15 percent return given an economic boom and a 78 percent chance of a 12 percent return given a normal economy.Which of the following changes will decrease the expected return on this security?
I.An increase in the probability of an economic boom
II.A decrease in the rate of return given a normal economy
III.An increase in the probability of a normal economy
IV.An increase in the rate of return given an economic boom

• A)I and II only
• B)I and IV only
• C)II and III only
• D)I, III, and IV only
• E)I, II, III, and IV

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Definitions:

Incapacitating

Rendering someone or something unable to function in a normal capacity.

Distressing

causing extreme anxiety, sorrow, or pain; emotionally unpleasant.

Generalized Anxiety Disorder

A chronic disorder marked by excessive, ongoing anxiety and worry that are difficult to control and interfere with daily activities.

Panic Disorder

A mental health condition characterized by sudden and repeated episodes of intense fear or discomfort along with physical symptoms like heart palpitations and dizziness.