You Recently Purchased a Stock That Is Expected to Earn

question 16

Multiple Choice

You recently purchased a stock that is expected to earn 22 percent in a booming economy, 9 percent in a normal economy, and lose 33 percent in a recessionary economy. There is a 5 percent probability of a boom and a 75 percent chance of a normal economy. What is your expected rate of return on this stock?

• A)-3.40 percent
• B)-2.25 percent
• C)1.25 percent
• D)2.60 percent
• E)3.50 percent

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Definitions:

Make-Believe Game

A type of play involving pretend or imaginative scenarios, often with specific roles assumed by the players.

Objective Side

Refers to the aspects of a situation or problem that are measurable, observable, and independent of individual subjective judgments.

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The process by which children learn and adopt the norms, values, behaviors, and social skills appropriate to their society.

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Refers to the way in which people mentally process and organize information from their environment.