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Suppose you observe the situation in the table below. Calculate the expected re...
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Suppose you observe the situation in the table below. Calculate the expected return on equity A.
|
|
Return if State Occurs
| |
State of Economy
|
Probability of State
|
Equity A
|
Equity B
|
Bust
|
0.25
|
-0.10
|
-0.30
|
Normal
|
0.50
|
0.10
|
0.05
|
Boom
|
0.25
|
0.20
|
0.40
|
0%
0%
0%
0%