You are faced with the probability distribution of the HPR on the stock market index fund given in Spreadsheet 5.1 of the text. Suppose the price of a put option on a share of the index fund with exercise price of $110 and time to expiration of 1 year is $12. a. What is the probability distribution of the HPR on the put option? (Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places.) State of the Economy Excellent Good Poor Crash Probability 0.25 0.45 0.25 0.05 Ending Price + Dividend STOCK HPR % % % % Ending Value PUT HPR % % % % 1 2 A Purchase Price = 3 4 5 6 State of the 7 Economy 8 Boom 9 Normal growth 10 Mild recession Probability 0.25 0.45 0.25 0.05 $100 Year-End Price 126.50 110.00 89.75 46.00 D 11 Severe recession 12 Expected Value (mean) 13 Varlance of HPR 14 Standard Deviation of HPR 15 Risk Premium 16 Standard Deviation of Excess Return Cash Dividends 0.3100 0.1400 -0.0675 -0.5200 SUMPRODUCT(B8:B11, E8:E11) = 0.0976 4.50 4.00 3.50 2.00 T-Bill Rate = Deviations HPR from Mean 0.2124 0.0424 Spreadsheet 5.1 Scenario analysis of holding-period return of the mutual fund -0.1651 -0.6176 0.04 Squared Deviations Excess Returns 0.2700 0.1000 0.0273 -0.1075 0.3815 -0.5600 from Mean 0.0451 0.0018 SUMPRODUCT(B8:B11, G8:G11) = SQRT(G13) = SUMPRODUCT(B8:B11, H8:H11) = H 0.0380 0.1949 0.0576 _SQRT(SUMPRODUCT(B8:B11, 18:111)) = Squared Deviations from Mean 0.0451 0.0018 0.0273 0.3815 0.1949