You Are Considering Purchasing Stock S

Multiple Choice

You are considering purchasing Stock S.This stock has an expected return of 12 percent if the economy booms,8 percent if the economy is normal,and 3 percent if the economy goes into a recessionary period.The overall expected rate of return on this stock will:

A) be equal to one-half of 8 percent if there is a 50 percent 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 independent of the probability of each economic state occurring.
E) increase as the probability of a boom economy increases.