George is considering an investment in Parson Inc. and has gathered the following information. What is the expected return for a share of the firm's stock?
State of the Economy Probability of the
State Conditional Expected Return
Parson Inc.
Recession .25 -20%
Steady .60 10%
Boom .15 35%
A) 5.00%
B) 6.25%
C) 8.33%
D) 10.00%
Answer: B
Explanation: B) Expected payoff = Σ payoffi × probabilityi = .25 ∗ -20% + .60 ∗ 10% + .15 ∗ 35% = 6.25%.
Business
You might also like to view...
Regarding the promotional mix, producers of business goods such as industrial machinery rely heavily on which of the following rather than on advertising?
a. personal selling b. public relations c. sales promotion d. publicity
Business
________ features statistical programs such a Missing Values, SamplePower, Decision Time and Data Entry
A) SAS B) MINITAB C) SPSS D) EXCEL
Business