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Suppose that the stock prices in the following three scenarios are Scenario S (0) 100 100 100 S (1) 110 105 90 S (2) 120

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Suppose that the stock prices in the following three scenarios are Scenario S (0) 100 100 100 S (1) 110 105 90 S (2) 120 100 100 with probabilities 1/4, 1/4, 1/2, respectively. Find the expected returns E(K(1) E(K(2)) and E(K(0, 2)). Compare 1E(K(0, 2)) with (1+E(K(T E(KI2))

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