Question
The following returns are predicted for ABC stock under three projected economic scenarios. Pi = Probability of economic scenario i. Ri = Return of ABC
The following returns are predicted for ABC stock under three projected economic scenarios.
Pi = Probability of economic scenario i. Ri = Return of ABC stock in economic scenario i.
PiRi
Boom0.2512%
Normal0.56%
Recession0.25-2%
What is the standard deviations of returns? If the returns are normally distributed, what is the expected range of returns assuming a 99% level of confidence? If the price of stock is currently $50, what is the expected range of prices using a 99% level of confidence?
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International Financial Reporting Standards An Introduction
Authors: Belverd E. Needles, Marian Powers
3rd Edition
1133187943, 978-1133187943
