You are considering purchasing a construction stock on the LUSE that is currently selling at k100.There is a 25% chance that the price will be k140;50% that it will be at k110; or that it may even drop to k80

Required:

Compute and fully interpret the following for the investment

1. The expected return for the security
2. The expected volatility of the security returns
3. Explain the source of the return for the security
4. If the risk free rate and the sensitivity of the security returns to the market returns are 4% and 1.2 respectively, determine and explain the market return for the minimum required hurdle rate.