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The representative investors assessment of the probability distribution for the holding-period return for a stock:...

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Finance

The representative investors assessment of the probability distribution for the holding-period return for a stock:

image

What is the expected variance for the stock closest to if the probabilities of the boom and recession states are equal after the investors reassessment?

A.

None of the options

B.

0.014

C.

0.018

D.

0.016

E.

0.019

State of the Economy Probability HPR Boom 0.40 22% Normal Growth 0.35 11% Recession 0.25 -9%

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