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You are thinking of buying Amazon (AMZN) stock today. The price of each share is $200....

You are thinking of buying Amazon (AMZN) stock today. The price of each share is $200. You will hold the stock for 1 year, collect whatever dividend is paid at the end of that year, and then sell the stock. Here are the possible dividends and prices 1 year from today:

State Probability Dividend Price

Good

 0.05 10 250
Moderate 0.6 10 210
Bad 0.3 10 190
Extremely bad 0.05 0 190

a) Find the return you will make in each state.

b) Standing today, you don't know which of the 4 returns in part A you will make. Find the expected return you expect to make before you actually invest.

c) Find the variance of the return.

d) Based on B and C, would you prefer to invest in AMZN stock, or in Apple (AAPL) stock. AAPL stock has an expected return of 8% and a standard deviation of 5%.

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