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Intro We know the following expected returns for stocks A and B, given different states of the economy: State (s) Probability E(rA,s) E(rB,s) Recession 0.3

Intro We know the following expected returns for stocks A and B, given different states of the economy: State (s) Probability E(rA,s) E(rB,s) Recession 0.3 -0.02 0.03 Normal 0.5 0.13 0.06 Expansion 0.2 0.21 0.1

Part 1 What is the expected return for stock A?

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