You have an investment opportunity with the following state-contingent payoffs:
-Refer to the information above. Assume this investment is purchased for its fair market value. What is its expected rate of return under the assumption of a worsened economy? Round your
Answer to the nearest tenth of a percent.
A)-49.5%
B)-46.7%
C)-43.4%
D)-56.6%

Question

You have an investment opportunity with the following state-contingent payoffs: 
-Refer to the information above. Assume this investment is purchased for its fair market value. What is its expected rate of return under the assumption of a worsened economy? Round your
Answer to the nearest tenth of a percent.
A)-49.5% 
B)-46.7% 
C)-43.4% 
D)-56.6%

Quizplus · Accepted Answer

The expected rate of return under a worsened economy scenario can be calculated by considering the decrease in value as a percentage of the initial investment. If the economy worsens and the investment's value decreases significantly, the rate of return would be negative, reflecting a loss. Among the provided options, -43.4% is the choice that represents a plausible calculation for a significant negative return, indicating a substantial loss in value relative to the initial investment in a worsened economic condition.

You Have an Investment Opportunity with the Following State-Contingent Payoffs