Question
The common stock of Leaning Tower of Pita, Inc., a restaurant chain, will generate the following payoffs to investors next year: Probability Dividend Stock Price
The common stock of Leaning Tower of Pita, Inc., a restaurant chain, will generate the following payoffs to investors next year:
| Probability | Dividend | Stock Price | |||||
| Boom | 0.4 | $ | 9 | $ | 199 | ||
| Normal economy | 0.55 | 2 | 104 | ||||
| Recession | 0.05 | 0 | 0 | ||||
The company goes out of business if a recession hits. Calculate the expected rate of return and standard deviation of return to Leaning Tower of Pita share-holders. The stock is selling today for $94. (Round your answers to 2 decimal places.)
| Expected rate of return % | |
| Standard deviation % |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Corporate Finance For Dummies
Authors: Michael Taillard
2nd Edition
1119850312, 978-1119850311
