You are considering purchasing stock S. This stock has an expected return of 8% if the economy booms and 3% if the economy goes into a recessionary period. The overall expected rate of return on this stock will:

Select one:

a. Be equal to one-half of 8% if there is a 50% chance of an economic boom.

b. Vary inversely with the growth of the economy.

c. Increase as the probability of a recession increases.

d. Be equal to 75% of 8% if there is a 75% chance of a boom economy.

e. Increase as the probability of a boom economy increases.