Risk and Return (Problem Set 1) Q1) a) Suppose ABC stock is trading at Rs 100. You believe that in one year there is a 25% chance the share price will be Rs 140, a 50% chance it will be Rs 110, and a 25% chance it will be Rs 80. ABC pays no dividends. Find the expected return and volatility of the stock. b) Suppose XYZ stock likely to have a 45% return or a -25% return. What are its expected return and volatility? c) Comment on the risk and return of these two stocks.