You Are Considering Buying a Share of Stock in a Firm

question 102

Multiple Choice

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 40% chance that the stock will sell for $30.00 at the end of one year.The alternative expectation is that there is a 60% chance that the stock will sell for $10.00 at the end of one year.What is the expected percentage one-year return on this stock,and what is the return standard deviation?

• A)6.67%,37.33%
• B)12.00%,93.50%
• C)20.00%,65.30%
• D)14.00%,119.67%

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Definitions:

Hypothesis

An assertion about what is true in a particular situation; often, a statement asserting that two or more variables are related to one another.

Procedures

A set of established methods or steps taken to perform a particular task or to achieve a specific goal.

Social Psychology

The scientific study of how individuals think, influence, and relate to one another within a societal context.

Developmental Psychology

Developmental Psychology is the scientific study of how and why human beings change over the course of their life, from infancy through to old age, focusing on psychological processes and development.