Assume the economy has a 12 percent chance of booming a 4, Finance Basics

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Assume the economy has a 12 percent chance of booming a 4

Question: Assume the economy has a 12 percent chance of booming, a 4 percent chance of being recessionary, and being normal the remainder of the time. A stock is expected to return 18.7 percent in a boom, 14.4 percent in a normal economy, and lose 12 percent in a recession. What is the expected rate of return on this stock?

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Finance Basics: Assume the economy has a 12 percent chance of booming a 4

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