If Microsoft Stockholders Expect Either a 25% Return or a 2

question 42

Multiple Choice

If Microsoft stockholders expect either a 25% return or a 2% return,each with a 50% probability,and Apple Computer shareholders expect a 10% return with certainty,what is the expected return from a portfolio comprised of equal amounts of stock from both firms?

• A) 37.00%
• B) 23.50%
• C) 11.75%
• D) 10.75%
• E) 12.33%

Interpret quantitative scenarios to calculate income for budgeting and consumption decisions.

Evaluate factors influencing labor supply decisions, including the effects of wage changes.

Distinguish between income effect and substitution effect in different economic contexts.

Understand the implications of changes in interest rates on savings and consumption over different periods.

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Definitions:

Profit per Unit

The financial gain obtained on each unit sold, calculated by subtracting the cost per unit from the selling price per unit.

Demand Curve

A graph showing the relationship between the price of a good and the quantity of that good consumers are willing to purchase at various prices.

Marginal Cost Curve

A graphical representation that shows the change in the total cost of producing one more unit of a good.

Price Elasticity

The influence exerted by price variations on the demand level of a specific good quantified.