You Are Considering Buying a Share of Stock in a Firm

question 106

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 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)1.00%,93.50%
• C)6.67%,37.33%
• D)84.00%,$9.67

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Definitions:

Reccomendation

Advisory suggestions provided to guide decisions or propose certain actions.

Unifying

Bringing people or elements together to make or become united, coherent, or as one entity.

Committee

A group of people appointed for a specific function, typically consisting of members of a larger group.

Argument

A discussion involving differing points of view or a debate.