You Have Been Given This Probability Distribution for the Holding-Period

question 59

Multiple Choice

You have been given this probability distribution for the holding-period return for GM stock: $\begin{array}{lll}\underline{\text { State of the Economy} } &\underline{ \text { Probability} } & \underline{\text { HPR } }\\\text { Boom } & .40 & 30\% \\\text { Normal growth } & .40& 11\%\\\text { Recession } & .20 & -10 \%\end{array}$

-What is the expected holding-period return for GM stock?

• A)10.4%
• B)11.4%
• C)12.4%
• D)13.4%
• E)14.4%

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Definitions:

Pure Endowment

An insurance policy where the insurer agrees to pay a specified sum of money at the end of a determined period on the condition that the insured is still alive.

Quasi-Endowment

Funds that are not permanently restricted under the terms of the gift but are designated by the governing board to function as an endowment, thus not easily expendable for general operations.

Liquid Assets

Assets that can be quickly and easily converted into cash without significantly affecting their value.

Financial Ratios

Quantitative measures derived from a business's financial statements, used to evaluate its performance, liquidity, and financial health.