The economy can have three states, recession or growth. If the probability of a recession is...
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The economy can have three states, recession or growth. If the probability of a recession is 0.15, normal growth is 0.34 and a boom is the remainder, and the payoff in the event of a recession is $100, normal growth is $400 and boom is $500, what is the expected payoff? The economy can have three states, recession or growth. If the probability of a recession is 0.15, normal growth is 0.34 and a boom is the remainder, and the payoff in the event of a recession is $100, normal growth is $400 and boom is $500, what is the expected payoff?
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