You Own a Stock That You Think Will Produce a Return

question 43

Multiple Choice

You own a stock that you think will produce a return of 11 percent in a good economy and 3 percent in a poor economy.Given the probabilities of each state of the economy occurring,you anticipate that your stock will earn 6.5 percent next year.Which one of the following terms applies to this 6.5 percent?

• A)arithmetic return
• B)historical return
• C)expected return
• D)geometric return
• E)required return

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Definitions:

Production Possibilities Curve

The Production Possibilities Curve (PPC) is a model that shows the various combinations of two goods or services that an economy can produce, given its resources and technology, illustrating the concept of opportunity cost.

Unemployment Rate

The percentage of the labor force unemployed at any time.

Technological Advance

The development and application of innovative processes, equipment, or software that enhances productivity, efficiency, or quality.

Farmers

Individuals or entities engaged in the activity of agriculture, which includes the cultivation of plants and rearing of animals for food, fiber, biofuel, medicines, and other products used to sustain and enhance human life.