Question

# Shares of Rampage are currently priced at \$50.00 per share. The following table indicates what could...

Shares of Rampage are currently priced at \$50.00 per share. The following table indicates what could happen with the Rampage stock price and dividend per share over the next year. What is the expected standard deviation of Rampage stock’s returns?  Answer as a rate in decimal format so that 12.34% would be entered as .1234 and 0.98% would be entered as .0098.

 Outcome Probability of outcome Price of Rampage stock in 1 year Dividend paid by Rampage in 1 year Good .60 \$81.27 \$3.73 Bad .40 \$28.97 \$1.03

 rate of return = ((selling price+dividend)/purchase price-1)*100

Return good times

=((81.27+3.73)/50-1)*100=70%

Return good times

=((28.97+1.03)/50-1)*100=-40%

 Stock Scenario Probability Return% =rate of return% * probability Actual return -expected return(A)% (A)^2* probability Good times 0.6 70 42 44 0.11616 Bad times 0.4 -40 -16 -66 0.17424 Expected return %= sum of weighted return = 26 Sum=Variance Stock = 0.2904 Standard deviation of Stock % =(Variance)^(1/2) 53.89= 0.5389

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