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You Are Considering Buying a Share of Stock in a Firm

question 106

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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 $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?


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