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Suppose your expectations regarding the stock market are as follows: State of Economy Probability HPR Boom 0.2 42% Normal Growth 0.6 23% Recession 0.2 -17%

Suppose your expectations regarding the stock market are as follows:

State of Economy Probability HPR

Boom 0.2 42%

Normal Growth 0.6 23%

Recession 0.2 -17%

Use above equations to compute the mean and standard deviation of the HPR on stocks.

a. What is the mean %?

b. What is the standard deviation %?

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