The Risk-Free Rate Is 3 A)290%
B)3

The risk-free rate is 3.0%. What is the expected risk premium on this security given the following information?
$\begin{array}{lcr}\text { State of the Economy } & \text { Probability } & E(R) \\\text { Boom } & .30 & 16\% \\\text { Normal } & .50 & 8\% \\\text { Recession } & .20 & -12\%\end{array}$

A) 2.90%
B) 3.01%
C) 3.40%
D) 3.80%
E) 4.15%

Correct Answer:

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