Question: Can you please help me solve this finance problem? Suppose that you have the following scenario: One stock (SNAP) and three (mutually exclusive and collectively
Can you please help me solve this finance problem?
Suppose that you have the following scenario: One stock (SNAP) and three (mutually exclusive and collectively exhaustive) future economic conditions (states): Boom, normal, and recession (B, N and R), with the following probabilities: 20%, 50%, and 30%, respectively. SNAP's conditional return is 25% under a boom economy, 10% under a normal economy, and -15% under a recession. Use Bayes' rule to calculate the updated (posterior) probability of a boom economy if the marginal (unconditional) expected return, given the information in the problem, actually occurs.
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