The Inferior Goods Co

question 343

Multiple Choice

The Inferior Goods Co. stock is expected to earn 14% in a recession, 6% in a normal economy, and lose 4% in a booming economy. The probability of a boom is 20% while the probability of a normal economy is 55% and the chance of a recession is 25%. What is the expected rate of return on this stock?

• A) 6.00%
• B) 6.72%
• C) 6.80%
• D) 7.60%
• E) 11.33%

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Definitions:

Historical Significance

The importance of an event, person, or place in history due to its impact, influence, or contribution to historical developments.

Socialism

A political and economic theory advocating collective or governmental ownership and administration of the means of production and distribution of goods.

Carlos Montezuma

An influential Yavapai doctor and activist in the early 20th century, advocating for the rights and sovereignty of Native American people.