The probability of a recession and a boom is 20 and 80, Financial Management

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The probability of a recession and a boom is 20 and 80

1. The stock of Hogwarts Inc. is expected to lose 10% in a recession and earn 17% in a boom. The probability of a recession and a boom is 20% and 80% respectively. What is the expected return of this stock?

2. You start with a portfolio valued at $500. Over the next twelve months it loses 40%; the following year it has a gain of 30%. At the end of two years your portfolio is worth how much?

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Financial Management: The probability of a recession and a boom is 20 and 80

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