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Problem 1. (10 points) Given the following scenarios for the possible states of the market next period with their associated probabilities of occurring, and the

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Problem 1. (10 points) Given the following scenarios for the possible states of the market next period with their associated probabilities of occurring, and the hypothetical end-of-period prices for shares of the ABC Corporation, Scenario Probability End-of-period price per share ($) Optimistic 0.4 115 Neutral 0.5 105 Pessimistic 0.1 90 and assuming a current price of $100 per share: a) Calculate the rate of return for each scenario. b) What is the expected return? The variance of end-of-period returns

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