Question: FinCorp Inc conducted an extensive analysis of the economy and
FinCorp Inc. conducted an extensive analysis of the economy and concluded that the probability of a recession next year is 35 percent, the probability of a boom is 45 percent, and the probability of a stable economy is 20 percent. Your boss has estimated that the price of PakCom Ltd. will be $60 if there is a recession, $110 if there is a boom and $85 if the economy is stable. Currently, PakCom is trading for $80. Calculate the ex ante expected return on PakCom.
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