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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 0.29 0.22 0.49 Ending

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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 0.29 0.22 0.49 Ending Price $ 140 110 80 HPR (including dividends) 51.5% 19.5 -18.0 Use the equations E (r) = Ep (s) r(s) and o2 = Ep (s) [r(s) E(r)]2 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 Mean % Standard deviation

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