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Suppose you have predicted the following returns for stocks X and Y in three possible states of nature. What are the expected returns? State Probability

Suppose you have predicted the following returns for stocks X and Y in three possible states of nature. What are the expected returns?

State

Probability

X

Y

Boom

0.3

0.15

0.25

Normal

0.5

0.10

0.20

Recession

0.2

0.02

0.01

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