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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