Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Assume that the economy can experience four possible states: high growth, normal growth, recession, or depression. For each of
those states, you expect the following stock market returns for the coming year:
State of the Economy
High Growth
Normal Growth
Recession
Depression
Probability
0.2
0.6
0.15
0.05
Return
+20%
+8%
-10%
-30%
In dollar terms, what is the value at risk (over a one-year horizon at a 5 percent probability) associated with a $1,000 investment?
The value at risk: $
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Transcribed Image Text:Assume that the economy can experience four possible states: high growth, normal growth, recession, or depression. For each of those states, you expect the following stock market returns for the coming year: State of the Economy High Growth Normal Growth Recession Depression Probability 0.2 0.6 0.15 0.05 Return +20% +8% -10% -30% In dollar terms, what is the value at risk (over a one-year horizon at a 5 percent probability) associated with a $1,000 investment? The value at risk: $
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