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Suppose your expectations regarding the stock market are as follows: State of the Economy HPR Probability 0.2 Boom 0.4 Normal growth Recession 0.4 E(r) =
Suppose your expectations regarding the stock market are as follows: State of the Economy HPR Probability 0.2 Boom 0.4 Normal growth Recession 0.4 E(r) = s-1P (s)r (s) Var (r) = o = -1P (s)[r (s) E (r)] - SD (r) = o = Var (r) Required: Use above equations to compute the mean and standard deviation of the HPR on stocks. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Mean % Standard deviation % 40% 16 -20
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