Question: The expected return on a security is currently based on a 22 percent chance of a 15 percent return given an economic boom and a
The expected return on a security is currently based on a 22 percent chance of a 15 percent return given an economic boom and a 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? 1. An increase in the probability of a normal economy II. A decrease in the rate of return given a normal economy III. An increase in the probability of an economic boom IV. An increase in the rate of return given an economic boom 1) I and Il only 2) I and IV only 3) I, II, III, and IV 4) I, 111, and IV only O 5) Il and Ill only
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