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Consider the possible rates of return that you might obtain over the next year. You can invest in stock S or stock U. State of

Consider the possible rates of return that you might obtain over the next year. You can invest in stock S or stock U.

State of Probability of Rate of Return Rate of Return Economy State of Economy on stock S on stock U Recession 0.20 3.0% -5.00% Normal 0.50 5.0% 10.0% Boom 0.30 7.0% 15.0%

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