You Own a Stock That You Think Will Produce a Return

question 43

Multiple Choice

You own a stock that you think will produce a return of 11 percent in a good economy and 3 percent in a poor economy.Given the probabilities of each state of the economy occurring,you anticipate that your stock will earn 6.5 percent next year.Which one of the following terms applies to this 6.5 percent?

• A)arithmetic return
• B)historical return
• C)expected return
• D)geometric return
• E)required return

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Definitions:

The Spacing Effect

A memory phenomenon where learning is greater when studying is spread out over time, as opposed to studying the same amount of content in a single session.

Procedural Memory

A type of long-term memory responsible for knowing how to do things, also known as motor skills, involving tasks such as riding a bike or typing.

Self-Reference Effect

The tendency for individuals to more easily remember information that is personally relevant or relates to themselves.

Worse

indicates a lower quality or more negative condition compared to another situation, condition, or outcome.