Use the Following Information to Answer the Question(s) Below

question 47

Multiple Choice

Use the following information to answer the question(s) below.

Nielson Motors (NM) has no debt. Its assets will be worth $600 million in one year if the economy is strong, but only $300 million if the economy is weak. Both events are equally likely. The market value today of Nielson's assets is $400 million.

-The expected return for Nielson Motors stock without leverage is closest to:

• A)-25.0%.
• B)-17.5%.
• C)-12.5%.
• D)12.5%.

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Definitions:

Robert Sternberg

An American psychologist best known for his theory on intelligence and creativity.

Commitment

implies a pledge or promise to do something, often requiring dedication and loyalty.

Sternberg's Triangular Theory

A theory of love proposed by psychologist Robert Sternberg, which posits that love consists of three components: intimacy, passion, and commitment.

Empty Love

A term often used in psychology to describe a relationship where commitment is present but intimacy and passion are lacking.