A Stock Is Expected to Return 11% in a Normal

question 71

Multiple Choice

A stock is expected to return 11% in a normal economy,19% if the economy booms,and lose 8% if the economy moves into a recessionary period.Economists predict a 65% chance of a normal economy,a 25% chance of a boom,and a 10% chance of a recession.What is the expected return on the stock?

• A) 11.10%
• B) 12.06%
• C) 11.98%
• D) 11.23%

---

Definitions:

Receive

Pertains to the act of taking something that is given, presented, or sent.

Freudian Psychoanalysis

A therapeutic method and theory of psychology developed by Sigmund Freud emphasizing unconscious motivations and conflicts as determinants of behavior.

Defense Mechanisms

Psychological strategies brought into play by individuals or the ego to protect against feelings of anxiety or guilt.

Overcome

To successfully deal with or gain control of something difficult, such as obstacles, challenges, or conditions.