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You recently purchased a stock that is expected to earn 12 percent in a booming economy, 8 percent in a normal economy, and lose 5

You recently purchased a stock that is expected to earn 12 percent in a booming economy, 8 percent in a normal economy, and lose 5 percent in a recessionary economy. There is 20 percent probability of a boom, 50 percent chance of a normal economy, and 30 percent chance of a recession. What is your expected rate of return on this stock?

7.30%

13.52%

4.34%

10.00%

4.90%

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