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Question 2) You have concluded that next year the following relationships are possible: Economic Status Probability Rate of Return Weak Economy 0.10 -20% Static Economy

Question 2) You have concluded that next year the following relationships are possible: Economic Status Probability Rate of Return Weak Economy 0.10 -20% Static Economy 0.65 10% Strong Economy 0.25 30%

What is your expected rate of return [E(Ri)] for next year? a. 14.5% b. 9.2% c. 6.7% d. 12.0%

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