A Stock Is Expected to Return 13 Percent in an Economic

question 13

Multiple Choice

A stock is expected to return 13 percent in an economic boom, 10 percent in a normal economy, and 3 percent in a recessionary economy.Which one of the following will lower the overall expected rate of return on this stock?

• A)An increase in the rate of return in a recessionary economy
• B)An increase in the probability of an economic boom
• C)A decrease in the probability of a recession occurring
• D)A decrease in the probability of an economic boom
• E)An increase in the rate of return for a normal economy

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Definitions:

Creativity

The ability to produce original and unusual ideas, or to make something new or imaginative.

Decision Making

The act of determining choices by pinpointing a decision, accumulating information, and examining other possible answers.

Preset Level

A predetermined or established level or standard that needs to be achieved or which serves as a benchmark for performance or operation.

Implicit Favorite

An unspoken preference or bias towards a particular option or choice in decision-making processes.