ECONOMICS
RISK AND RETURN
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Question
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You recently purchased a stock that is expected to earn 19 percent in a booming economy, 12 percent in a normal economy, and lose 8 percent in a recessionary economy. The probability of a boom economy is 16 percent while the probability of a normal economy is 78 percent. What is your expected rate of return on this stock?
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12.40 percent
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10.25 percent
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11.92 percent
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12.54 percent
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Explanation:
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