Question
You are evaluating two firms, a tech company A and a durable goods company B with varying probability of returns which are a function of
You are evaluating two firms, a tech company A and a durable goods company B with varying\ probability of returns which are a function of the economy. This probability of returns is a function of\ four economic states: depression, recession, normal, boom; probabilities as follows:\ Macro Trend Probability\ Depression 0.10\ Recession 0.20\ Normal 0.50\ Boom 0.20\ Provide the expression for the sum of the states:\ For each state, A and B have different returns data which we wish to explore. The returns data is as\ follows:\ State Return (A)in % Return(B) in %\ Depression -30 0\ Recession -10 5\ Normal 20 20\ Boom 5 -5\ Find E(RA) and \\\\sigma A given E(RB) = 10.0% and \\\\sigma B = 10.49%:
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