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Calculate the expected rate of return

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Reference no: EM132790063

Question - AAA Company's common stock will generate the following payoffs to investors next year:

Dividend Stock Price

Boom $5 $50

Normal economy 2 30

Recession 0 10

Calculate the expected rate of return and standard deviation of return to AAA company shareholders. Assume for simplicity that the three possible states of the economy are equally likely. The stock is selling today for $20.

Reference no: EM132790063

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