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14. The prices of stocks A and B one year from now depend on the state of economy: Stock Price in year 1 Boom Recession
14. The prices of stocks A and B one year from now depend on the state of economy: Stock Price in year 1 Boom Recession 500 A 420 B 300 280 The current prices of A and B are $435 and $275, respectively. (a) The expected return on stock A is 10%. What is the probability of boom in year 1? [3 points] (b) What is the standard deviation of return on stock A? [3 points] (c) What is the expected return on stock B? [3 points]
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