Find the expected return on an asset that is expected to have returns of -10%, 8%, and 20% if the economy is in boom, normal, and recession states, respectively? The probabilities of boom, normal, and recession states happening are 20%, 50%, and 30%.

• 6.00%
• 2.67%
• 8.00%
• 5.00%

A stock has an expected return of 12% and a standard deviation of 24%. The other has an expected return of 8% and a standard deviation of 20%. Tom invested in these stocks equally (50% of his investment went toward each of the stocks). If the two stocks are negatively correlated, which is the most feasible standard deviation of the portfolio?

• 25%
• 22%
• 18%
• not enough information to determine

The recent dividend was $1.24 per share, and the stock is selling today for $67. The dividend is expected to grow at a rate of 5% per year for the future. If the return is 7% on investments with comparable risk, should you purchase the stock?

• No, because the stock is overpriced $1.90.
• Yes, because the stock is underpriced $5.00.
• No, because the stock is overpriced $5.00.
• Yes, because the stock is underpriced $1.90.