The common price of a stock is 50 dollars. Three different states are expected: high risk (or bad) with 30% probability, medium risk (or fair) with 40% probability, and low risk (or good) with 30% probability. The expected future prices for each state are 59, 54, and 47 dollars, respectively. The expected dividends are 3, 1, and -1 dollars, respectively. Calculate the expected return and standard deviation over all contingencies .

The common price of a stock is 50 dollars. Three different states are expected: high risk (or bad) with 30% probability, medium risk (or fair) with 40% probability, and low risk (or good) with 30% probability. The expected future prices for each state are 59, 54, and 47 dollars, respectively. The expected dividends are 3, 1, and -1 dollars, respectively. Calculate the expected return and standard deviation over all contingencies .

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 22P

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Question

3- The common price of a stock is 50 dollars. Three different states are expected: high risk (or bad) with 30% probability, medium risk (or fair) with 40% probability, and low risk (or good) with 30% probability. The expected future prices for each state are 59, 54, and 47 dollars, respectively. The expected dividends are 3, 1, and -1 dollars, respectively. Calculate the expected return and standard deviation over all contingencies .

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