An Investor Owns a Security That Is Expected to Return

question 72

Multiple Choice

An investor owns a security that is expected to return 14 percent in a booming economy and 6 percent in a normal economy.The overall expected return on the security is 8.88 percent.Given there are only two states of the economy,what is the probability that the economy will boom?

• A)28 percent
• B)33 percent
• C)36 percent
• D)41 percent
• E)45 percent

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Definitions:

Social Security Offices

Government facilities where individuals can apply for or manage Social Security benefits.

County Tax Rolls

Official records maintained by county governments listing property ownership, assessed values, and applicable property taxes.

Insurance Companies

Organizations that provide coverage, compensating losses or providing protection against risk, in exchange for premium payments.

Banks

Banks, which are authorized to accept deposits, grant loans, and deliver a range of financial services to both individual and corporate clients.