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There are two stocks in a portfolio and two possible states of economy that may occur. The relevant information is summarized as follows: Stock return
There are two stocks in a portfolio and two possible states of economy that may occur. The relevant information is summarized as follows: Stock return if a certain state of economy occurs State of Economy Probability Stock 1 Stock 2 Good 0.50 8% 15% Bad 0.50 4% -7% Initial Investments $6,000 $4,000 What is the expected return of stock 1? A) 6% B) 4% C) 8% D) 2%
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