studoc Suppose there is uncertainty about the growth rate. With 50% probability the growth rate will be 6%, with 50% probability the growth rate will be 10%. What are the respective market values under the two growth rates
Given there is uncertainty about the growth rate, the respective market values under the two growth rates is the weighted average rate of growth, which is: 50% x 6% + 50% x 10% = 8%.
