15. The expected return on a security is currently based on a 22 percent chance

Question

15. The expected return on a security is currently based on a 22 percent chance of a 15 percent return given an economic boom of 78 percent chance of a 12 percent return given a normal economy. Which of the following changes will decrease the expected return on this security? I. An increase in the probability of an economic boom II. A decrease in the rate of return given a normal economy III. An increase in the probability of a normal economy IV. An increase in the rate of return given an economic boom. A. I and II only B. I and IV only C. II and III only D. I, III, and IV only E. I, II, III, and IV

Explanation / Answer

Hi, Option B is correct. Thanks, Aman

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