Example #1: Consider three states of the economy, Boom, Normal, and Recession. There is a 20% chance of being in a Boom economy, a 50% chance of being in a Norm 30% chance of being in a Recession. Now consider two stocks, first 110%, returns 20%, 16%, and 10% in Boom, Normal, and Recession respectively, what is the expected return for each company? al economy, and a Marti 22%, and-60% in Boom, Normal, and Recession respectively and U.S. Electric, which