Question: Compute the expected return given these three economic states, their likelihoods, and the potential returns: Economic State Probability Return Fast Growth 0.2 23 % Slow

Compute the expected return given these three economic states, their likelihoods, and the potential returns:

Economic State Probability Return
Fast Growth 0.2 23 %
Slow Growth 0.6 14 %
Recession 0.2 30 %

Multiple Choice

  • 3.5 percent

  • 7.0 percent

  • 7.5 percent

  • 12.5 percent

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