What is the expected rate of return on the stock, Corporate Finance

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What is the expected rate of return on the stock

Problem

The common stock of Low Cost Foods is expected to earn 12 percent in a booming economy, earn 7 percent in a normal economy, and lose 6 percent in a recession. The probability of a boom is 15 percent, the probability of a normal economy is 80 percent, and the chance of a recession is 5 percent. What is the expected rate of return on this stock?

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Corporate Finance: What is the expected rate of return on the stock

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