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

question 41

Multiple Choice

Use the following information to answer the question(s) below.
Suppose that the market portfolio is equally likely to increase by 24% or decrease by 8%.Security "X" goes up on average by 29% when the market goes up and goes down by 11% when the market goes down.Security "Y" goes down on average by 16% when the market goes up and goes up by 16% when the market goes down.Security "Z" goes up on average by 4% when the market goes up and goes up by 4% when the market goes down.
-The expected return on security with a beta of 1 is closest to:

• A)-4.0%
• B)3.2%
• C)4.0%
• D)8.0%

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Definitions:

Multiplier

In macroeconomics, a factor that quantifies the effect of increased investment or spending in an economy, typically leading to a proportionally greater increase in income or output.

Multiplier

In economics, the multiplier effect refers to the proportional amount of increase, or decrease, in final income that results from an injection, or withdrawal, of spending.

Business Cycle

The fluctuations in economic activity that an economy experiences over a period of time, marked by phases of expansion and contraction.

Government Spending

Expenditures by government agencies on goods and services that are intended to improve the nation's economy and the welfare of its citizens.