You Recently Purchased a Stock That Is Expected to Earn

question 12

Multiple Choice

You recently purchased a stock that is expected to earn 12.6 percent in a booming economy,8.9 percent in a normal economy,and lose 5.2 percent in a recessionary economy.Each economic state is equally likely to occur.What is your expected rate of return on this stock?

• A)6.47 percent
• B)8.90 percent
• C)5.43 percent
• D)7.65 percent
• E)7.01 percent

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Definitions:

Honduras

A country in Central America, characterized by its diverse landscapes, cultures, and history, but also known for its challenges with poverty and violence.

Nicaragua

A country located in Central America, known for its significant geographical diversity, ranging from lakes and volcanoes to rainforests and beaches.

Comparative Advantage

Refers to the ability of a country or individual to produce a particular good or service at a lower opportunity cost than its trading partners.

Specialized

Having expertise or focusing on a specific area of knowledge, function, or skill.