The market risk premium is 9.25%. The rates of return for a stock are as follows: 2% if the economic state is recession; 8% if the economic state is normal; and 11% if the economic state is expansion. The probabilities of the economic states are as follows: 45% probability of recession;35% probability of normal;and 20% probability of expansion. What is the expected return for this stock?

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Calculating the Expected Return of the Stock To find t... View the full answer