Rosita Owns a Stock with an Overall Expected Return of 14.40

question 34

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 48 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) 13.85 percent
• E) 14.40 percent

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Definitions:

Standard Normal Distribution

A specific probability distribution that has a mean of zero and a standard deviation of one, representing a normal distribution.

Unit of Measurement

A definite magnitude of a quantity, defined and adopted by convention or by law, that is used as a standard for measurement of the same kind of quantity.

Total Number

The aggregate count of all items or elements in a dataset or collection.

Standard Normal Distribution

A normal distribution with a mean of 0 and a standard deviation of 1, used in Z-tests and other statistical analyses.