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Suppose your expectations regarding the stock market are as follows: State of the Economy Boom Normal growth Recession E (r) = -1p(s)r (s) Var (r)
Suppose your expectations regarding the stock market are as follows: State of the Economy Boom Normal growth Recession E (r) = -1p(s)r (s) Var (r) = o = -1 p (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 your answers to 2 decimal places.) Mean Standard deviation % % Probability 0.2 0.4 0.4 4 HPR 40% 16 - 20
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