QUESTION 11

The following refers to questions 11 to 13:

Phoenix Company common stock is currently selling for $20 per share. Security analysts at Smith Blarney have assigned the following probability distribution to the price of (and rate of return on) Phoenix stock one year from now (Risk = Square root of the variance):

Situation	Rate of Return (ri)	Probability	Exp Ret	( ri r~)2 (Pi)
I	20%	0.25
II	0%	0.30
III	+20%	0.25
IV	+40%	0.20
			r~ = ______%	Variance = _______%	Risk = _____%

1. Assuming that Phoenix is not expected to pay any dividends during the coming year,

determine the expected rate of return on Phoenix Stock.

a) 8%

b) 18%

c) 10%

d) 40%

2.Assuming now that Phoenix is not expected to pay any dividends during the coming year, determine the risk % of possible rates of return on Phoenix stock (to the nearest tenth of a percent).

a 8.0%

b 20.9%

c 16.7%

d 17.2%

QUESTION 13

Interpreting Return & Risk 100%

probability under the curve

68% Probability

16% |_________________________________________|16%

- +

There is a 16% chance that the investor could earn:

		a. lower than 0 % or even as higher than 16%
		b. lower than -12.9% or even higher than 28.9%
		c. lower -8.7% or even as high as 24.7%
		d. lower than -9.2% or even as high 25.2%