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A portfolio manager is considering investing in a new stock. He thinks, overall, the stock will earn 16% next year. If a recession occurs (30%
A portfolio manager is considering investing in a new stock. He thinks, overall, the stock will earn 16% next year. If a recession occurs (30% probability), the stock will earn 0%. If the economy stays stagnant (40% probability), the stock will earn 14%. There is a third possibility, which is that the economy expands significantly. What does the analyst believe that the stock will earn in this expansion scenario?
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