Problem 8-01

You are considering buying stock A. If the economy grows rapidly, you may earn 20 percent on the investment, while a declining economy could result in a 15 percent loss. Slow economic growth may generate a return of 7 percent. If the probability is 12 percent for rapid growth, 24 percent for a declining economy, and 64 percent for slow growth, what is the expected return on this investment? Round your answer to one decimal place.

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