1,

You recently purchased a stock that is expected to earn 11 percent in a booming economy, 9 percent in a normal economy and lose 6 percent in a recessionary economy. There is a 15 percent probability of a boom, a 74 percent chance of a normal economy. What is your expected rate of return on this stock?

a.		6.00
b.		7.65
c.		7.25
d.		8.97

2.

What are the arithmetic and geometric average returns for a stock with annual returns of 4%, 9%, -6%, and 18%?

a.		6.25%; 5.89%
b.		6.25%; 8.33%
c.		8.3%; 5.89%