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A stock is expected to return 20 percent in a booming economy, 10 percent in a normal economy, and lose 5 percent in a recession.
A stock is expected to return 20 percent in a booming economy, 10 percent in a normal economy, and lose 5 percent in a recession. The probabilities of an economic boom, normal state, or recession are 10 percent, 85 percent, and 5 percent, respectively. What is the expected rate of return on this stock?
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