Rosita Owns a Stock with an Overall Expected Return of 14.40

question 50

Multiple Choice

Rosita owns a stock with an overall expected return of 14.40 percent.The economy is expected to either boom or be normal.There is a 52 percent chance the economy will boom.If the economy booms,this stock is expected to return 15 percent.What is the expected return on the stock if the economy is normal?

• A) 12.00 percent
• B) 12.83 percent
• C) 13.15 percent
• D) 13.75 percent
• E) 14.40 percent

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Definitions:

Net Benefits

The total benefits of some activity or policy less the total costs of that activity or policy.

Price-Fixing

An agreement among competitors to raise, fix, or otherwise maintain the price at which their goods or services are sold, preventing market competition.

Tying Contracts

Agreements where the sale of one product (the tying product) is linked to the purchase of another (the tied product), often scrutinized under antitrust laws.

Horizontal Mergers

Mergers between companies that operate in the same industry, often leading to consolidation and increased market power.