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Consider the following information: Rate of Probability of State Return State of if State Economy of Economy 17 Occurs Recess

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Answer #1

Expected Ret = Sum [ Prob * Ret ]

Scenario Prob Ret Prob * ret
Recession 0.17 -0.12 -0.0204
Normal 0.48 0.14 0.0672
Boom 0.35 0.33 0.1155
Expected Ret 0.1623
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