You are considering buying a share of stock in a firm that has the following two possible payoffs with the corresponding probability of occurring. The stock has a purchase price of $15.00. You forecast that there is a 30% chance that the stock will sell for $30.00 at the end of one year. The alternative expectation is that there is a 70% chance that the stock will sell for $10.00 at the end of one year. What is the expected percentage return on this stock, and what is the return variance? A 6.67%, 9.17% B 84.00%, $9.67 C 6.67%, 37.33% D 1.00%, 93.50%
You are considering buying a share of stock in a firm that has the following two possible payoffs with the corresponding probability of occurring. The stock has a purchase price of $15.00. You forecast that there is a 30% chance that the stock will sell for $30.00 at the end of one year. The alternative expectation is that there is a 70% chance that the stock will sell for $10.00 at the end of one year. What is the expected percentage return on this stock, and what is the return variance? A 6.67%, 9.17% B 84.00%, $9.67 C 6.67%, 37.33% D 1.00%, 93.50%
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:You are considering buying a share of stock in a
firm that has the following two possible payoffs
with the corresponding probability of occurring.
The stock has a purchase price of $15.00. You
forecast that there is a 30% chance that the stock
will sell for $30.00 at the end of one year. The
alternative expectation is that there is a 70%
chance that the stock will sell for $10.00 at the
end of one year. What is the expected percentage
return on this stock, and what is the return
variance?
A 6.67%, 9.17%
B 84.00%, $9.67
C 6.67%, 37.33%
D 1.00%, 93.50%
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