Joe is a new investor and has been closely watching a company by the name of USA Ltd., a pharmaceutical company aiming to develop a coronavirus vaccine. Joe believes the following returns are possible in 2022 and has attached a probability to each potential outcome: Probability Possible Return .20 185.00% .30 83.50% .30 -5.00% .20 -100.00% c) Joe hired an experienced stock analyst, who advised Joe that based on his advanced modelling, the expected return and standard deviation for USA Ltd are at 7.50% and 45.00%, respectively. Using these new variables, detail the range of returns expected by investing in USA Ltd. at the 68% (one standard deviation) and 95% (two standard deviations) confidence levels. Show variables, calculation and a concluding statement in your response.
Joe is a new investor and has been closely watching a company by the name of USA Ltd., a pharmaceutical company aiming to develop a coronavirus vaccine.
Joe believes the following returns are possible in 2022 and has attached a probability to each potential outcome:
|
Probability |
Possible Return |
|
.20 |
185.00% |
|
.30 |
83.50% |
|
.30 |
-5.00% |
|
.20 |
-100.00% |
c) Joe hired an experienced stock analyst, who advised Joe that based on his advanced modelling, the expected return and standard deviation for USA Ltd are at 7.50% and 45.00%, respectively. Using these new variables, detail the range of
Show variables, calculation and a concluding statement in your response.
We have the expected return and standard deviation of the returns for a particular stock. We have to find the detail the range of returns at the 68% (one standard deviation) and 95% (two standard deviations) confidence levels.
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