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You Are Considering Buying a Share of Stock in a Firm

question 23

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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 $50.00.You forecast that there is a 40% chance that the stock will sell for $70.00 at the end of one year.The alternative expectation is that there is a 60% chance that the stock will sell for $30.00 at the end of one year.What is the expected percentage return on this stock,and what is the standard deviation of returns on this stock?


Definitions:

Open Practices

Practices in research and scholarship that promote accessibility, transparency, and accountability, which include open access publishing, open data, and open methodology.

Transparency

The quality of being open, communicative, and accountable, making actions, decisions, and processes easy to understand and scrutinize.

Independent Variable

A variable that is manipulated in an experiment to see if it causes a change in another variable.

Confounding Variable

A factor other than the independent variable that might produce an effect in an experimental design, thus confounding the results.

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