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A certain stock returns 20% annually if the economy is in a strong growth regime 5% annually if the economy is growing midly and drops
A certain stock returns 20% annually if the economy is in a strong growth regime 5% annually if the economy is growing midly and drops 10% anually recession periods.Your company applied its proprietary economy forecasting model to the upcoming year and obtained the probabilities for the ecnomy to be in strong growth, mild growth and recession states as 30% 50% and 20% respectively.Calculate the expected annual return of the stock in question under such an economic forecast in %?
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