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:

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?
b. Compute the standard deviation of the percentage return over the coming year.
c. If the risk-free return is 7 percent, what is the risk premium for a stock marketinvestment?

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State of the Economy Probability High Growth Normal Growth Recession 0.2 0.7 0.1 Return +30% +12% -15%