You are considering purchasing stock S. This stock has an expected return of 12 percent if the economy booms, 8 percent if the economy is normal, and 3 percent 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 percent if there is a 50 percent 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 independent of the probability of each economic state occurring.

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