Ronnie Estimates That There Are Three Possible Return Outcomes for a Stock

question 74

Multiple Choice

Ronnie estimates that there are three possible return outcomes for a stock he is considering for purchase.He thinks that there is a 45% chance the economy will boom and his stock will return 25%,a 50% chance the economy will continue at its current pace and the stock will return 8%,and finally,that there is a 5% chance that the economy will falter and the expected return on his stock will be -10%.Given these probabilities and conditional expected returns,what is Ronnie's expected return on the stock he is considering for purchase?

• A)8.00%
• B)11.25%
• C)14.75%
• D)15.25%

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Definitions:

Bony Feature

Distinctive skeletal structures or characteristics that are made of bone tissue.

Vertebra Prominens

The seventh cervical vertebra (C7) characterized by its long and prominent spinous process.

Hyoid Bone

A U-shaped bone in the neck that supports the tongue and provides attachment points for muscles associated with swallowing and speech.

Occipital Ridge

A ridge on the external surface of the occipital bone of the skull, important for muscle attachment and structural integrity.