You Are Considering Purchasing Share S

Multiple Choice

You are considering purchasing share S.This share has an expected return of 8% if the economy booms and 3% if the economy goes into a recessionary period.The overall expected rate of return on this share will:

A) be equal to one-half of 8% if there is a 50% chance of an economic boom.
B) vary inversely with the growth of the economy.
C) increase as the probability of a recession increases.
D) be equal to 75% of 8% if there is a 75% chance of a boom economy.
E) increase as the probability of a boom economy increases.