You Are Considering Investing in a Firm That Has the Following

question 1

Multiple Choice

You are considering investing in a firm that has the following possible outcomes: Economic boom: probability of 25%; return of 25%
Economic growth: probability of 60%; return of 15%
Economic decline: probability of 15%; return of -5%
What is the expected rate of return on the investment?

• A) 15.0%
• B) 11.7%
• C) 14.5%
• D) 25.0%

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Definitions:

Atmosphere

The layer of gases surrounding Earth or another planet, essential for life as it provides air to breathe and protects from solar radiation.

Warmer World

A scenario indicating an increase in the Earth's average temperature, often associated with global climate change phenomena.

Hurricanes

Powerful tropical storms with heavy rain and winds exceeding 74 miles per hour, typically forming over warm ocean waters.

Droughts

Extended periods of low precipitation causing shortage of water, affecting ecosystems, agriculture, and water supply.