Question

You own a stock that you think will produce a return of 11 percent in a good economy and 3 percent in a poor economy. Given the probabilities of each state of the economy occurring, you anticipate that your stock will earn 6.5 percent next year. Which one of the following terms applies to this 6.5 percent?

Answer 1

Answer:

The answer  is: Expected return

Explanation:

Expected return refers to the estimated profit (or loss) than an investment will yield considering that the investor knows the potential rates of return (RoR) of that investment.

To determine the expected return, the investor multiplies the potential RoR of the investment by their chances of occurring.