You Are Considering Purchasing Stock S

question 11

Multiple Choice

You are considering purchasing Stock S.This stock has an expected return of 12 percent if the economy booms,8 percent if the economy is normal,and 3 percent if the economy goes into a recessionary period.The overall expected rate of return on this stock will:

• A)be equal to one-half of 8 percent if there is a 50 percent chance of an economic boom.
• B)vary inversely with the growth of the economy.
• C)increase as the probability of a recession increases.
• D)be independent of the probability of each economic state occurring.
• E)increase as the probability of a boom economy increases.

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Definitions:

Beta Particle

A fast-moving electron or positron with high energy released during the radioactive decay of an atomic nucleus.

Atomic Nucleus

The small, dense region at the center of an atom, consisting of protons and neutrons and containing nearly all the atom's mass.

Beta Particle

A high-energy, high-speed electron or positron emitted by the radioactive decay of an atomic nucleus during beta decay.

Atomic Nucleus

The dense central core of an atom, containing protons and neutrons, around which electrons orbit.