Finding Expected Return, Variance Return and Standard Deviation
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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%
What is the expected return for Alpha Corporation? What is the variance return on Alpha Corporation? What is the standard deviation of the return on the Alpha Corporation?
See document attached for chart.
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Solution Summary
Solutions explains steps to find the expected return, variance return and standard deviation.
Solution Preview
Expected return = Sum(Probability X return)
Expected return = 0.25 X 40% + 0.5 X 0% ...
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