Purchase Solution

Probability & Expected Return

Not what you're looking for?

Ask Custom Question

How is the probability and expected return calculated on a single stock?

Purchase this Solution
Solution Summary

solution describes how to calculate probability and expected return on a single stock.

Solution Preview

Hello

Please see the details as below.

Expected return is the mean (average) of the probability distribution of the returns. There are various methods to calculate the expected return. Let us look at the following example.

Returns from a stock (%) Probability
10 0.1
13 ...

Purchase this Solution
Free BrainMass Quizzes
Motivation

This tests some key elements of major motivation theories.

Social Media: Pinterest

This quiz introduces basic concepts of Pinterest social media

Production and cost theory

Understanding production and cost phenomena will permit firms to make wise decisions concerning output volume.

Marketing Management Philosophies Quiz

A test on how well a student understands the basic assumptions of marketers on buyers that will form a basis of their marketing strategies.

Writing Business Plans

This quiz will test your understanding of how to write good business plans, the usual components of a good plan, purposes, terms, and writing style tips.

View More Free Quizzes
Related BrainMass Solutions

  • Expected Return on Investment

    For example, if a security has a 20% probability of providing a 10% rate of return, a 50% probability of providing a 12% rate of return, and a 25% probability of providing a 14% rate of return, the expected rate of return is (.20)(10%) + (.50)(12%) +

  • Expected return and standard deviation

    The expected return is calculated as Sum(Probability X associated return) Expected return = 0.2X5% +0.6X8%+0.2X15% Expected return = 8.8% To calculate the standard deviation, we first calculate the variance Variance = Sum((Expected Return - Return

  • Standard Deviation of expected returns

    a. 8.06 percent b. 8.68 percent c. 10.33 percent d. 11.47 percent We first calculate the expected return on the stock Expected return = Sum (Probability X return) Expected return = 0.65 X 12.5% + 0.25 X -5% + 0.1 X 18% Expected return =

  • Solving for the Expected return

    Scenario 1: Probability = 50% or 0.5, Return = 35% Scenario 2: Probability = 30% or 0.3, Return = 10% Scenario 3: Probability = 20% or 0.2, Return = -28% Expected return = Probability of scenario 1*scenario 1 + Probability of scenario 2*scenario

  • Expected Return and Standard Deviation of a Security

    state 1, probability 0.2, expected return 10% state 1, probability 0.6, expected return 15% state 3, probability 0.2, expected return 20% a. 15%; 6.50% b. 12%; 5.18% c. 15%; 3.16% d. 15%; 10.00% e. 20%; 5.00% Answer: C Expected

  • Expected return,standard deviation, coefficient of variation

    Expected return is calculated as Expected return = Sum (Probability X Rate of return) We multiply each return by its probability and then sum all the values Expected return = 0.15 X -0.1 + 0.15 X -0.2 + 0.35 X .00 + 0.25 X .15 + 0.10 X .15 = 0.0075

  • Determining risk and return for a stand alone investment asset

    The value of this probability range from zero to 1, where zero probability menace there is no chance of return and 1 means this is only return from the investment. Based on these rates of return and probability the rate of return is expected.

  • Finance: Expected Rate of Return for Investment Scenarios

    Scenario Probability Return Recession 18% 2% Moderate 65% 9.5% Strong 17% 14.2% The expected rate of return is given by: E(r) = Probability * Return E(r) = 0.18

  • Finding Expected Return, Variance Return and Standard Deviation

    Expected return = Sum(Probability X return) Expected return = 0.25 X 40% + 0.5 X 0% + 0.25 X -20% = 5% Variance = Sum ((Expected return - return)^2 X Probability) Variance = (5%-40%)^2 X 0.25 + (5%-0%)^2 X 0.5 + (5%--20%)^2X0.25 Variance = 4.75%

View More Related Solutions