There Is a 30 Percent Probability That a Particular Stock

question 81

Multiple Choice

There is a 30 percent probability that a particular stock will earn a 17 percent return and a 70 percent probability that it will earn 11 percent.What is the risk-free rate if the risk premium on the stock is 8.60 percent?

• A)4.20 percent
• B)4.80 percent
• C)5.20 percent
• D)5.40 percent
• E)5.80 percent

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Definitions:

Group Decision Making

The process by which multiple individuals come together to make a decision collectively, often involving discussion and negotiation.

Groupthink

A psychological phenomenon in which the desire for harmony or conformity within a group leads to an irrational or dysfunctional decision-making outcome.

Diffusion of Responsibility

A phenomenon where individuals in a group are less likely to take action or feel accountable for actions because the responsibility is seen as being distributed among all members of the group.

Riskier Decisions

Choices or actions taken that involve a higher level of uncertainty and potential for negative outcomes compared to alternative options.