Calculate and explain the change in the expected return

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Reference no: EM131247128

Given the following hypothetical end-of-period prices for shares of the Drill-On Corporation,

and assuming a current price of $50 per share:

a) Calculate the rate of return for each probability. What is the expected return? The variance of end-of-period returns? The range? The semi interquartile range?

b) Suppose forecasting is refined such that probabilities of end-of-period prices can be broken down further, resulting in the following distribution:

1490_Table 8.jpg

Calculate and explain the change in

a) The expected return;

b) The range of returns;

c) The semi interquartile range of returns. Calculate the semi variance of end-of-period returns. Why might some investors be concerned with semivariance as a measure of risk?

Reference no: EM131247128

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