The expected return on a stock that is computed using economic probabilities is:
A) guaranteed to equal the actual average return on the stock for the next five years.
B) guaranteed to be the minimal rate of return on the stock over the next two years.
C) guaranteed to equal the actual return for the immediate twelve month period.
D) a mathematical expectation based on a weighted average and not an actual anticipated outcome.
E) the actual return you will receivE.

Question

Quizplus · Accepted Answer

Economic probabilities are used to calculate an expected return on a stock. This expected return is a mathematical expectation based on a weighted average of the possible outcomes and is not a guaranteed actual outcome. Therefore, option D is the correct answer. Options A, B, and C are incorrect because they make guarantees that cannot be made based on economic probabilities. Option E is incorrect because the expected return is not necessarily the same as the actual return.

The Expected Return on a Stock That Is Computed Using