Use the Information for the Question(s)below

question 69

Multiple Choice

Use the information for the question(s) below.
Consider an economy with two types of firms,S and I.S firms always move together,but I firms move independently of each other.For both types of firm there is a 70% probability that the firm will have a 20% return and a 30% probability that the firm will have a -30% return.
-What is the expected return for an individual firm?

• A)14%
• B)3%
• C)5%
• D)-5%

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Definitions:

Asset Test

A measure to determine a company's ability to quickly convert its assets into cash to cover short-term liabilities.

GAAP

A set of accounting standards and practices that are adhered to by companies to ensure consistency, reliability, and comparability of financial statements.

Segment Reporting

The practice of dividing a company's financial reports to show the performance of different areas of the business, such as geographical regions or product lines.

Reportable Segment

A component of a business that can be separately identified for reporting purposes, often because it engages in operations that generate revenues and expenses.