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Belinkie Enterprises & Overlake Company a. What is the expected return on each stock? b. What is the variance of the returns on each stock?

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Four equally likely states of the economy may occur next year. Below are the returns on the stocks on Belinkie Enterprises and Overlake company under each possible state.

State Belinkie Enterprises Overlake Company
1 0.04 0.05
2 0.06 0.07
3 0.09 0.10
4 0.04 0.14

a. What is the expected return on each stock?
b. What is the variance of the returns on each stock?

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This solution computes expected return.

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