The Rotor Co

question 21

Multiple Choice

The Rotor 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:

Growth Strategy

A plan for business expansion, which may include entering new markets, launching new products, or increasing market share.

Growth Strategy

A plan of action designed to increase an organization’s market share, revenues, or scale of operations.

Product Development

The process of bringing a new product or service to market, including ideation, design, creation, and marketing stages.

Diversification Strategy

A growth strategy whereby a firm introduces a new product or service to a market segment that it does not currently serve.