Q. No. 1

Suppose that your estimates of the possible one-year returns from investing in the common stock of the A. A. Eye-Eye Corporation were as follows:

probability of occurrence: 0.1 0.2 0.4 0.2 0.1

possible Return: -10% 5% 20% 35% 50%

a. What are the expected return and standard deviation?

b. Assume that the parameters that you just determined [under Part (a)] pertain to a normal probability distribution. What is the probability that return will be zero or less? Less than 10 percent? More than 40 percent? (Assume a normal distribution.)