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You recently purchased a stock that is expected to earn 16% in a booming economy, 12% in a normal economy, and lose 8% in a
You recently purchased a stock that is expected to earn 16% in a booming economy, 12% in a normal economy, and lose 8% in a recessionary economy. There is a 20% probability of a boom, a 70% chance of a normal economy, and a 10% chance of a recession. What is your expected rate of return on this stock?
Multiple Choice
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8.60%
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12.40%
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6.67%
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6.00%
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10.80%
2. The higher the standard deviation, the less certain the rate of return in any one given year. true or false
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