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2. Assume the following next year stock market scenarios – probabilities and returns probability Return High...

2. Assume the following next year stock market scenarios – probabilities and returns

probability

Return

High growth

.7

30%

Medium growth

.2

12%

Recession

.1

-15%

a. Compute the expected return in percent.

b. Compute the expected value of $1000 investment next year

c. Compute the Standard deviation

d. If the risk free rate is .05, what is the risk premium

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