Consider the following probability distribution of returns for Alpha Corporation: Current Stock Price ($) Stock Price in One Year ($) Return R Probability PR   $35 40% 25% $25 $25 0% 50%   $20  -20% 25%   What is the expected return for Alpha Corporation? What is the variance of the return on Alpha Corporation? What is the standard deviation of the return on Alpha Corporation

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter8: Analysis Of Risk And Return
Section: Chapter Questions
Problem 17P
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Consider the following probability distribution of returns for Alpha Corporation:

Current Stock Price ($)

Stock Price in One Year ($)

Return R

Probability PR

 

$35

40%

25%

$25

$25

0%

50%

 

$20 

-20%

25%

 

  1. What is the expected return for Alpha Corporation?
  2. What is the variance of the return on Alpha Corporation?
  3. What is the standard deviation of the return on Alpha Corporation
  4. Suppose an investment is equally likely to have a 35% return or a -20% return. What is the expected return for this investment?
  5. Suppose an investment is equally likely to have a 35% return or a -20% return. What is the variance on the return for this investment
  6. Suppose an investment is equally likely to have a 35% return or a -20% return. What is the standard deviation on the return for this investment?
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