Assume that the economy can experience high growth normal, Ask an Expert

Economics

Assume that the economy can experience high growth, normal growth, slow down or severe recession. Under these conditions you expect the following stock market returns for the coming year:

state of the economy probability return

high growth .25 30%

normal growth .4 10%

slow down .2 2%

severe recession .15 -10

a. compute the expected value of a $1000 investment over the coming year. What is the expected return on investment?

b. compute the standard deviation of the return as a percentage over the coming year.

c. if the risk free return is 9%, what is the risk premium for a stock market investment?

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Business Economics, Economics

Category:- Business Economics
Reference No.:- M91340960

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