7. Look at Spreadsheet 5.1 in the text. Suppose you now revise your expectations regarding the stock price as follows:

State of the Economy Probability Ending Price HPR (including dividends)

Boom .35 $140 44.5%

Normal growth .30 110 14.0 Recession .35 80 16.5 Use Equations 5.11 and 5.12 to compute the mean and standard deviation of the HPR on stocks.

Compare your revised parameters with the ones in the spreadsheet