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State of the Economy Probability of Occurring Rate of Return on Stock if State of the Economy Occurs Expected Return Boom 0.15 85.0% Normal 0.53

State of the Economy Probability of Occurring Rate of Return on Stock if State of the Economy Occurs Expected Return Boom 0.15 85.0% Normal 0.53 32.0% Recession -25.0% Consider the stock performance described above. What is its expected return?

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29.7%

30.7%

21.7%

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