Currently the level of the S&P 500 Index is 1300, and the yield on the 90-day...

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Finance

Currently the level of the S&P 500 Index is 1300, and theyield on the 90-day treasury bill is 2.75%. The following tablelists the forecasts of an economist for the S&P 500 in thecoming year.
Economic Environment
Probability of Occurance
Expected return of the S&P
Above Average
30%
22%
Average
45%
8%
Poor
25%
-35%
Calculate the expected return and standard deviation for theS&P 500. Construct the Security Market Line graph (from yourfindings) and show what the market risk premium is. Label yourgraph to receive full credit.
What would happen to the expected return on stocks if investorsperceived an increase in the volatility of stocks? Why?

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SP 500 Index is 1300yield onthe 90day treasury bill is 275PiEPi EEconomic EnvironmentProbability of OccuranceExpected return of the SPWeighted Expected ReturnExpected See Answer

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Currently the level of the S&P 500 Index is 1300, and theyield on the 90-day treasury bill is 2.75%. The following tablelists the forecasts of an economist for the S&P 500 in thecoming year.Economic EnvironmentProbability of OccuranceExpected return of the S&PAbove Average30%22%Average45%8%Poor25%-35%Calculate the expected return and standard deviation for theS&P 500. Construct the Security Market Line graph (from yourfindings) and show what the market risk premium is. Label yourgraph to receive full credit.What would happen to the expected return on stocks if investorsperceived an increase in the volatility of stocks? Why?

Economic Environment	Probability of Occurance	Expected return of the S&P
Above Average	30%	22%
Average	45%	8%
Poor	25%	-35%