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A company faces the following probability distribution: State of the Economy Probability of this State Occurring (p i ) Rate of Return if this State
A company faces the following probability distribution:
| State of the Economy | Probability of this State Occurring (pi) | Rate of Return if this State Occurs (ki) |
| Boom | 0.25 | 20% |
| Normal | 0.50 | 16% |
| Recession | 0.25 | 12% |
What is the expected rate of return on the company's stock?
| a | 12% |
| b | 16% |
| c | 14% |
| d | 20% |
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1st Edition
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