What Is the Expected Return on a Stock with a Guaranteed

question 186

Multiple Choice

What is the expected return on a stock with a guaranteed dividend of $3 if there is a 30-percent chance its price could rise by 50 percent, a 30-percent chance its price could fall by 50 percent, and a 40-percent chance its price could stay constant at the present price of $60 per share?

• A)$60
• B)$33
• C)$3
• D)$0
• E)-$27

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Definitions:

Investments

Allocation of resources, such as time, money, or effort, with the expectation of achieving a future return or benefit.

Close Relationships

Significant personal connections between individuals, characterized by emotional depth, commitment, and interdependence.

Independence

The condition of being free from dependence, influence, or control by others, often associated with self-reliance.

Trust

The firm belief in the reliability, truth, ability, or strength of someone or something, essential for social cohesion and cooperation.