Assume that the economy can experience high growth, normal growth, or recession. Under these conditions,you expect the following stock market returns for the coming year:State of the EconomyHigh GrowthNormal GrowthRecessionProbability0.20.70.1a. Compute the expected value of a $1,000 investment over the coming year. If you invest $1,000 today, howmuch money do you expect to have next year? What is the percentage expected rate of return?Return45%20%- 4%Instructions: Enter dollar values rounded to the nearest whole dollar and percentages rounded to onedecimal place.The expected value is $and the expected rate of return isb. Compute the standard deviation of the percentage return over the coming year.Standard deviation = =%%%.c. If the risk-free return is 7 percent, what is the risk premium for a stock market investment?Risk premium

State of economy Probability Return High Growth 0.2 45% Normal Growth 0.7 20% Recession 0.1…

Assume that the economy can experience high growth, normal growth, or recession. Under these conditions, you expect the following stock market returns for the coming year: State of the Economy High Growth Normal Growth Recession Probability 0.2 0.7 0.1 Return 45% 20% -4% a. Compute the expected value of a $1,000 investment over the coming year. If you invest $1,000 today, how much money do you expect to have next year? What is the percentage expected rate of return? Instructions: Enter dollar values rounded to the nearest whole dollar and percentages rounded to one decimal place. The expected value is $ % and the expected rate of return is b. Compute the standard deviation of the percentage return over the coming year. Standard deviation = %.

Assume that the economy can experience high growth, normal growth, or recession. Under these conditions, you expect the following stock market returns for the coming year: State of the Economy High Growth Normal Growth Recession Probability 0.2 0.7 0.1 Return 45% 20% -4% a. Compute the expected value of a $1,000 investment over the coming year. If you invest $1,000 today, how much money do you expect to have next year? What is the percentage expected rate of return? Instructions: Enter dollar values rounded to the nearest whole dollar and percentages rounded to one decimal place. The expected value is $ % and the expected rate of return is b. Compute the standard deviation of the percentage return over the coming year. Standard deviation = %.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Financial mathematics