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Compute the expected return of an asset given these three economic states, their likelihoods, and the...

Compute the expected return of an asset given these three economic states, their likelihoods, and the potential returns:

Economic State          Probability         Return  

Fast Growth               20.00%             30.00%

Slow Growth              50.00%               6.00%

Recession                  30.00%              -2.00%

8.40%

11.33%

12.65%

15.47%

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Answer #1

state of economy Returns probability Fast slow Recession 30% 6% -2% 20% 50% 30% Expected return (Return x probability) 6.000%

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