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GE is currently traded at $25 per share. The following is a scenario analysis for its future share price in one year. Scenario, s
GE is currently traded at $25 per share. The following is a scenario analysis for its future share price in one year. Scenario, s Probability, p(s) Share price Dividends GDP3% ? $30.00 $2.00 3%> GDP1% 0.60 $26.50 $1.00 1%> GDP0% 0.10 $19.50 $0.50 0% GDP-1% 0.04 $17.50 $0.00 -1%> GDP 0.01 $12.50 $0.00 1. The probability for the first scenario is missing, what is its value? 2. Compute the holding period return (HPR) for each scenario. 3. Compute the expected return and volatility, and then the "reward-to-volatility" or Sharpe ratio for GE based on this scenario analysis. Assume that the T-bill rate is 1%.
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