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Today, the stock price of company A is $40 and the stock price of company B is $50. You estimate that the two stocks
Today, the stock price of company A is $40 and the stock price of company B is $50. You estimate that the two stocks will have the following prices one year from now, conditional on the state of the economy: State of Economy Probability Price of A Price of B Good Bad .80 $50 $50 .20 $30 $60 Please assume that both stocks will not pay any dividends in the next year and consider the one-year net returns of each stock. a. Calculate the expected return of each stock. b. Calculate the standard deviation of each stock return.
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International financial management
Authors: Jeff Madura
12th edition
1133947832, 978-1305195011, 978-1133947837
