Question
An investor buys 1 share of ABC Ltd at the price of $32 on December 1,...
An investor buys 1 share of ABC Ltd at the price of $32 on December 1, 2019. The firm is not expected to pay any dividends. Consider the following three possible scenarios for the share price on December 1, 2020:
- $50 with a probability of 20%
- $34 with a probability of 50%
- $27 with a probability of 15%
- $20 with a probability of 15%
a) Calculate the expected return for holding the share for a year.
b) Calculate the variance of return and standard deviation of return.
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