An Analyst Believes That a Stock's Return Depends on the State

question 112

Multiple Choice

An analyst believes that a stock's return depends on the state of the economy, for which she has estimated the following probabilities: According to the analyst's estimates, the expected return of the stock is ________.

• A) 7.8%
• B) 11.4%
• C) 11.7%
• D) 13.0%

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Definitions:

Fixed Costs

Expenses that do not change with the level of goods or services produced over the short term, such as rent or salaries.

Continuous Budgeting

A process of continuously updating the budget by adding a new period as the current period is completed, ensuring the budget always extends a fixed period into the future.

Fiscal-Year

A one-year period used for financial reporting and budgeting that does not necessarily coincide with the calendar year; it can start on any day of the year.

Flexible Budgeting

A budgeting approach that allows for adjustments to budgeted figures based on changes in actual operating conditions.