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Problem 5-7 Suppose your expectations regarding the stock price are as follows: State of the Market Boom Normal growth Recession Probability 0.21 0.30 0.49 Mean
Problem 5-7 Suppose your expectations regarding the stock price are as follows: State of the Market Boom Normal growth Recession Probability 0.21 0.30 0.49 Mean Standard deviation Ending Price $ 140 110 80 Use the equations E (r) = p (s) r(s) and o = p (s) [r(s) E(r)] to compute the mean and standard deviation of the HPR on stocks. (Do not round intermediate calculations. Round your answers to 2 decimal places.) S S % % HPR (including dividends) 50.5% 18.0 -12.5
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