Question: Albert estimates that there are three possible return outcomes for a stock he is considering for purchase. He thinks that there is a 35% chance
Albert estimates that there are three possible return outcomes for a stock he is considering for purchase. He thinks that there is a 35% chance the economy will boom and his stock will return 25%, a 50% chance the economy will continue at its current pace and the stock will return 8%, and finally, that there is a 15% chance that the economy will falter and the expected return on his stock will be -10%. Given these probabilities and conditional expected returns, what is Albert's expected return on the stock he is considering for purchase?
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