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2) Table 1. Economy Stock Expected Holding Period Return- per quarter Stock of the Economy Boom Normal growth Recession Probability 0.30 0.50 0.20 HPR 18%

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2) Table 1. Economy Stock Expected Holding Period Return- per quarter Stock of the Economy Boom Normal growth Recession Probability 0.30 0.50 0.20 HPR 18% 1296 -5% If the Economy Stock consistently creates the above quarterly holding period returns, what is the effective annual rate of the HPRs? (3 point)

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