Consider the following probability distribution of returns for Alpha Corporation:
Current Stock Price ($25):
One Year ($) $35, $25, $20;
Return R: 40%, 0%, -20%;
Probability PR: 25%, 50%, 25%.
(A). Compute the expected return for Alpha Corporation.
(B). Compute the standard deviation of the return on Alpha Corporation.
Please refer attached file for better clarity of tables and missing formulas.
Probability, P Return(R) P*R
0.25 40% 0.1
0.50 0% ...
The solution describes the steps to calculate the expected return and standard deviation in the given case.