Question

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

Answer 1

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