Assume that the economy can experience high growth, normal growth, or recession. Under these conditions, you expect the following stock market returns for the coming year:

State of the Economy Probability Return

High Growth $0\mathrm{.}235\%$

Normal Growth $0\mathrm{.}715\%$

Recession $0\mathrm{.}1-10\%$

a$.$ Compute the expected value of a $$1,000$ investment over the coming year. If you invest $$1,000$ today, how much money do you expect to have next year? What is the percentage expected rate of return?

Instructions: Enter dollar values rounded to the nearest whole dollar and percentages rounded to one decimal place.

The expected value is $ and the expected rate of return is $\%.$

b$.$ Compute the standard deviation of the percentage return over the coming year.

Standard deviation $=\%$

c$.$ If the risk$-$free return is $7$ percent, what is the risk premium for a stock market investment?

Risk premium $=\%$