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Suppose your expectations regarding the stock market are as follows: State of the Economy Probability HPR Boom 0.3 44% 0.4 14 Normal growth Recession 0.3

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Suppose your expectations regarding the stock market are as follows: State of the Economy Probability HPR Boom 0.3 44% 0.4 14 Normal growth Recession 0.3 -16 Use Equations 5.10-5.12 to compute the mean and standard deviation of the HPR on stocks. LO 5-4) Make sure to show detailed step-by-step calculations reaching your Windows contacvate Windows (5.12) SD (n) = 0 = Var (7) S (5.11) Var (r) = o2 = Ep (3)[r(s) E (r)]? s=1 () = P(s)r(s) (5.10) 1

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