Question 2

An entity has an investment which analyst think that there will be a 40% probability that the expected return will be 10%; 50% chance it will be 6% and 10% chance that the return will be 20 %.

1. Calculate the expected returns (2 mark)
2. Calculate the standard deviation (2 marks)
3. An entity has a stock valued at $15 on December 31, 2019. On December 31, 2020, the stock was priced at $10 per share, During the period, directors declared and paid final dividends of $6 for each ordinary share held. What is the shareholders return (2 marks)